Financial accounting

8.1 Consider the following 2007 data for Newark General Hospital (in millions of dollars):




                                    Static                                   Flexible                  Actual


                                    Budget                                 Budget                   Result


Revenues                     $4.7                                      $4.8                       $4.5


Cost                               4.1                                        4.1                         4.2


Profits                            0.6                                        0.7                         0.3




a Calculate and interpret the profit variance




b Calculate and interpret the revenue variance




c Calculate and interpret the cost variance


d Calculate and interpret the volume and price variances on the 

 e. Calculate and interpret the volume and management variances on the cost side.


f. How are the variances calulated above related?


8.2 Here are the 2007 revenues for the Wendover Group Practice Association for four different budgets, in thousands of dollars:




                                              Flexible                              Flexible


Static                             (Enrollment/Utilization)       (Enrollment)                  Actual


Budget                            Budget                                      Budget                      Results


   $425                             $200                                          $180                         $300               




a What does the budget data tell you about the nature of Wendover’s  patients: Are they capitated or fee-for-service?




b Calculate and interpret the following variances




Revenue variance




Volume variance




Price variance




Enrollment variance  


Utilization variance