In: Accounting
Prepare 2-page research paper defining and discussing price, efficiency, volume, and utilization variances including the formula for calculating each of them. Also, discuss how monitoring and analyzing each of them can be used by management in healthcare organizations.
40 points
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Pricing iis ithe iprocess iwhereby ia ibusiness isets ithe iprice iat iwhich iit iwill isell iits iproducts iand iservices, iand imay ibe ipart iof ithe ibusiness's imarketing iplan. iIn isetting iprices, ithe ibusiness iwill itake iinto iaccount ithe iprice iat iwhich iit icould iacquire ithe igoods, ithe imanufacturing icost, ithe imarketplace, icompetition, imarket icondition, ibrand, iand iquality iof iproduct.
i i i i i i i i i iEfficiency isignifies ia ipeak ilevel iof iperformance ithat iuses ithe ileast iamount iof iinputs ito iachieve ithe ihighest iamount iof ioutput. iEfficiency irequires ireducing ithe inumber iof iunnecessary iresources iused ito iproduce ia igiven ioutput iincluding ipersonal itime iand ienergy. iIt iis ia imeasurable iconcept ithat ican ibe idetermined iusing ithe iratio iof iuseful ioutput ito itotal iinput.
1. Efficiency iis ithe ifundamental ireduction iin ithe iamount iof iwasted iresources ithat iare iused ito iproduce ia igiven inumber iof igoods ior iservices i(output).
2. Economic iefficiency iresults ifrom ithe ioptimization iof iresource-use ito ibest iserve ian ieconomy.
3. Market iefficiency iis ithe iability ifor iprices ito ireflect iall iof ithe iavailable iinformation.
4. Operational iefficiency iis ia imeasure iof ihow iwell ifirms iconvert ioperations iinto iprofits
The iformula ito icalculate iwork iefficiency iis ithe iratio iof ioutput ito iinput iexpressed ias ia ipercentage. iFor ia imachine, iyou ican idetermine ithe iwork iput iinto ithe imachine idepending ion ihow ithe imachine iworks.
Efficiency i= ioutput i/ iinput
iAnd iyou ican imultiply ithe iresult iby i100 ito iget iwork iefficiency ias ia ipercentage.
Volume iis ithe iamount iof ian iasset ior isecurity ithat ichanges ihands iover isome iperiod iof itime, ioften iover ithe icourse iof ia iday. iFor iinstance, istock itrading ivolume iwould irefer ito ithe inumber iof ishares iof ia isecurity itraded ibetween iits idaily iopen iand iclose. iTrading ivolume, iand ichanges ito ivolume iover ithe icourse iof itime, iis iimportant iinputs ifor itechnical itraders.
a. Volume iis ithe inumber iof ishares iof ia isecurity itraded iduring ia igiven iperiod iof itime.
b. Generally isecurities iwith imore idaily ivolume iare imore iliquid ithan ithose iwithout, isince ithey iare imore i"active".
c. Volume iis ian iimportant iindicator iin itechnical ianalysis ibecause iit iis iused ito imeasure ithe irelative isignificance iof ia imarket imove.
d. The ihigher ithe ivolume iduring ia iprice imove, ithe imore isignificant ithe imove iand ithe ilower ithe ivolume iduring ia iprice imove, ithe iless isignificant ithe imove.
Variance ianalysis iis ithe iquantitative iinvestigation iof ithe idifference ibetween iactual iand iplanned ibehavior. iThis ianalysis iis iused ito imaintain icontrol iover ia ibusiness. iVariance ianalysis iis iespecially ieffective iwhen iyou ireview ithe iamount iof ia ivariance ion ia itrend iline, iso ithat isudden ichanges iin ithe ivariance ilevel ifrom imonth ito imonth iare imore ireadily iapparent. iVariance ianalysis ialso iinvolves ithe iinvestigation iof ithese idifferences, iso ithat ithe ioutcome iis ia istatement iof ithe idifference ifrom iexpectations, iand ian iinterpretation iof iwhy ithe ivariance ioccurred.
1) Purchase iprice ivariance. iThe iactual iprice ipaid ifor imaterials iused iin ithe iproduction iprocess, iminus ithe istandard icost, imultiplied iby ithe inumber iof iunits iused.
2) Labor irate ivariance. iThe iactual iprice ipaid ifor ithe idirect ilabor iused iin ithe iproduction iprocess, iminus iits istandard icost, imultiplied iby ithe inumber iof iunits iused.
3) Variable ioverhead ispending ivariance. iSubtract ithe istandard ivariable ioverhead icost iper iunit ifrom ithe iactual icost iincurred iand imultiply ithe iremainder iby ithe itotal iunit iquantity iof ioutput.
4) Fixed ioverhead ispending ivariance. iThe itotal iamount iby iwhich ifixed ioverhead icosts iexceed itheir itotal istandard icost ifor ithe ireporting iperiod.
5) Selling iprice ivariance. iThe iactual iselling iprice, iminus ithe istandard iselling iprice, imultiplied iby ithe inumber iof iunits isold.
6) Material iyield ivariance. iSubtract ithe itotal istandard iquantity iof imaterials ithat iare isupposed ito ibe iused ifrom ithe iactual ilevel iof iuse iand imultiply ithe iremainder iby ithe istandard iprice iper iunit.
7) Labor iefficiency ivariance. iSubtract ithe istandard iquantity iof ilabor iconsumed ifrom ithe iactual iamount iand imultiply ithe iremainder iby ithe istandard ilabor irate iper ihour.
8) Variable ioverhead iefficiency ivariance. iSubtract ithe ibudgeted iunits iof iactivity ion iwhich ithe ivariable ioverhead iis icharged ifrom ithe iactual iunits iof iactivity, imultiplied iby ithe istandard ivariable ioverhead icost iper iunit.
Variance i (σ2) iin istatistics iis ia imeasurement iof ithe ispread ibetween inumbers iin ia idata iset. iThat iis, iit imeasures ihow ifar ieach inumber iin ithe iset iis ifrom ithe imean iand itherefore ifrom ievery iother inumber iin ithe iset.
1. Subtract ithe imean ifrom ieach ivalue iin ithe idata. iThis igives iyou ia imeasure iof ithe idistance iof ieach ivalue ifrom ithe imean.
2. Square ieach iof ithese idistances i(so ithat ithey iare iall ipositive ivalues), iand iadd iall iof ithe isquares itogether.
3. Divide ithe isum iof ithe isquares iby ithe inumber iof ivalues iin ithe idata iset.
The istandard ideviation i(σ) iis isimply ithe i(positive) isquare iroot iof ithe ivariance.