Question

In: Accounting

1. Schultz Clinic uses patient-visits as its measure of activity. The clinic bases its budgets on...

1. Schultz Clinic uses patient-visits as its measure of activity. The clinic bases its budgets on the following information: Revenue should be $40 per patient-visit. Personnel expenses should be $30,000 per month plus $11 per patient-visit. Medical supplies should be $1,000 per month plus $8 per patient-visit. Occupancy expenses should be $10,000 per month plus $1 per patient-visit. Administrative expenses should be $6,000 per month plus $1 per patient-visit.

The clinic reported the following actual results for February:

Patient-visits

3,000

Revenue

$122,000

Expenses

Personnel expense

66,000

Medical supplies

26,000

Occupancy expense

15,000

Administrative expense

2,000

Prepare a report showing the clinic's revenue and spending variances for February. Label each variance as favorable (F) or unfavorable (U).

Solutions

Expert Solution

Ans. SCHULTZ CLINIC
Actual Results Revenue & Spending variance Flexible Budget
Patient visits 3,000 3,000
Revenue $122,000 $2,000 F $120,000
Less: Expenses:
Personnel expense $66,000 $3,000 U 63000
Medical supplies $26,000 $1,000 U 25000
Occupancy expense $15,000 $2,000 U 13000
Administrative expense $2,000 $7,000 F 9000
Total expenses $109,000 $1,000 F $110,000
Net operating income $13,000 $3,000 F $10,000
*Calculations for Flexible budget:
Revenue 3,000 * $40
Less: Expenses:
Personnel expense $30,000 + ($11 * 3,000)
Medical supplies $1,000 + ($8 * 3,000)
Occupancy expense $10,000 + ($1 * 3,000)
Administrative expense $6,000 + ($1 * 3,000)
*Flexible budget is prepared on the basis of actual Number of units.
*Revenue and spending variance = Actual results - Flexible budget.
*Increase in revenue or net income and decrease in cost from flexible to actual   = Favorable.
*Decrease in revenue or net income and increase in cost from flexible to actual   = Unfavorable.

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