Question

Providence Hospital generates monthly performance reports for each of its departments. The hospital must maintain an adequate staff of attending and on-call physicians at all times, so physician costs are not affected by the number of patient visits. But all other costs do vary with patient activity. Nurse-hours are used as the activity measure for nursing costs, and patient visits are used as the activity measure for the cost of supplies and other variable costs.

The head physician of the hospital's emergency room, Yolanda Mortensen, is responsible for control of costs. During October, the emergency room unit expected to treat 3,700 patients but actually treated 4,200 patients. The following additional information for October is available:

	Budget	Actual	Variance
Nurse-hours	1,480	1,764	-284
Nursing costs	$34,040	$31,300	$2,740
Supplies & other variable costs	$40,700	$27,600	$13,100
Fixed costs	$98,000	$103,900	$-5,900

Required
Compute the flexible-budget variances for each of the cost categories for October (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers):

  Nursing costs    

  Supplies and other variable costs    

  Fixed costs

Answer 1

• All working forms part of the answer
• Nursing Costs

Nursing Cost
A	Budgeted Nursing Costs	$               34,040
B	Budgeted Nursing hours	1480
C = A/B	Budgeted rate per nursing hours	$                       23
D	Actual Nurse hours	1764
E = C x D	Flexible Budget Nursing Costs	$               40,572
F	Actual Nursing cost	$               31,300
G = E - F	Flexible Budget Variance	$                 9,272 = Answer
	Variance	Favourable = Answer

• Supplies & Other Variable Costs

Supplies & Other variable Costs
A	Budgeted Supplies cost	$          40,700
B	Budgeted Patients	3700
C = A/B	Budgeted rate per patient	$                   11
D	Actual no. of patients	4200
E = C x D	Flexible Budget Cost	$          46,200
F	Actual Cost	$          27,600
G = E - F	Flexible Budget Variance	$          18,600 = Answer
	Variance	Favourable = Answer

• Fixed Cost

Flexible Budget Fixed Cost	$          98,000
Actual Fixed Cost	$        103,900
Flexible Budget Variance	$             5,900 = Answer
Variance	Unfavourable
	[because actual cost is MORE]
	[Please enter $ 5900 as a NEGATIVE amount]