Question

Kaylar Clinic uses patient-visits as its measure of activity. During September, the clinic budgeted for 3,000 patient-visits, but its actual level of activity was 2,900 patient-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for September:

Data used in budgeting:

                                                 Fixed Element per Month Variable Element per Month

Revenue …………………….. $0 $37.20

Personal Expenses…………. $27600 $11.30

Medical Expenses………….. $1500 $6.80

Occupancy Expenses…….... $6200 $1.70

Administrative Expenses…... $3600 $0.30

Actual results for September:

Revenue …………………….. $105010                                   

Personal Expenses…………. $61020                                   

Medical Expenses………….. $22120                                   

Occupancy Expenses…….... $10930                                 

Administrative Expenses…... $4570

1. Compute Kaylar's total expense spending variance. State answer as a positive

2. Compute Kaylar's total expense activity variance. State answer as a positive.

3. Compute Kaylar's total revenue activity variance. State answer as a positive.

4. What was the total net operating income activity variance for Kaylars? State answer as a positive.

Answer 1

(i)	Total expense spending variance is $ 1,450 Unfavorable.
(ii)	Total expense activity variance is $ 2,010 Favorable.
(iii)	Total revenue activity variance is $ 3,720 Unfavorable.
(iv)	Total net operating income activity variance is $ 1,710 unfavorable.

Workings:

	Actual (a)	Flexible Budget (b)	Spending Variance (a) - (b)	Variance Type	Activity Variance	Variance Type	Planning /Static Budget
Patient-Visits-q	2,900	2,900					3,000
Revenue	105,010	107,880	2,870	U	3,720	U	111,600
Less: Expenses
Personal Expense (27,600 + 11.30q )	61,020	60,370	650	U	1,130	F	61,500
Medical Expenses ( 1,500 + 6.80q)	22,120	21,220	900	U	680	F	21,900
Occupancy Expenses ( 6,200 + 1.70q )	10,930	11,130	200	F	170	F	11,300
Administrative Expenses ( 3,600 + 0.30q )	4,570	4,470	100	U	30	F	4,500
Total Expenses	98,640	97,190	1,450	U	2,010	F	99,200
Net operating Income	6,370	10,690	4,320	U	1,710	U	12,400