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