Question

Here are the 2017 revenues for Nu-Kim Radiology for four different budgets:

Static Flexible Enrollment & Utilization Flexible Enrollment Actual Budget Budget Budget Results

$150,000 $140,000 $156,000 $162,000 Calculate the following:

Interpret each variance:

1) Revenue Variance –

2) Volume Variance –

3) Price –

4) Enrollment Variance –

5) Utilization Variance –

Answer 1

1) Revenue variance = Actual Revenues - Static Revenues

      = $162000 - $150000

                              = $12000 (F)

2) Volume variance = Flexible Revenues (enrollment and utilization) – Static Revenues

                        = $140000 - $150000

                            = $10000 (U)

3) Price variance = Actual Revenues – Flexible Revenue

                         = $162000 - $140000

                         = $ 22000 (F)

Interpretation for Above 3 variances =

It seems from above 3 variance Number of Cusotmers who using services of Nu-Kim Radiology is Less, since the Volume variance is Unfavourable but Nu-Kim Radiology charges higher for their services, since the Price variance is favourable, due to higher service charges overall variance (Revenue) is favourable.      

4) Enrollment variance = Flexible Revenues (enrollment) – Static Revenues

       = $156000 - $150000

                               = $6000 (F)

5) Utilization variance = Flexible revenues (enrollment and utilization) - Flexible revenues (enrollment)

   = $140000 - $156000

                                 = $16000 (U)

Interpretation for Above 2 Variances =

It seems Enrollment for Nu-Kim Radiology is good, since the Enrollment variance is Favourable but conversion of this Enrollment into Utilisation of services of Nu-Kim Radiology is very less, since utilisation variance is Unfavourable.