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Operating Budget, Flexible Budget: Carroll Clinic

2008 Carroll Clinic Operating Budget:

I. Volume (number of visits)
Payer A 9000
Payer B 12,000
Total 21,000
II. Reimbursement (per visit)
Payer A $ 100
Payer B $ 90
III. Costs
Variable costs:
Supplies $ 315,000
Fixed costs:
Labor $1,035,000
Overhead 500,000
Total $1,535,000
IV. Forecasted P&L Statement
Revenues:
Payer A $ 900,000
Payer B $ 1,080,000
Total Revenue $1,980,000
Variable costs $315,000
Fixed costs $1,535,000
Total costs $1,850,000
Profit $ 130,000

Carroll Clinic Actual Results 2008

I. Volume
Payer A 11,000
Payer B 12,000
Total 23,000
II. Reimbursement
Payer A $ 95
Payer B $ 95
III. Costs
Variable costs:
Supplies $ 350,000
Fixed costs:
Labor $1,000,000
Overhead 500,000
Total $1,500,000
IV. Forecasted P&L Statement
Revenues:
Payer A $ 1,045,000
Payer B 1,140,000
Total Revenues $2,185,000
Variable costs $ 350,000
Fixed costs $1,500,000
Total $1,850,000
Profit $ 335,000

a. What are the profit, revenue, and cost variances based on the simple budget?
b. Construct a flexible budget for 2008.
c. What are the profit, revenue and cost variances based on the flexible budget?
d. Interpret the results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.

Solution Summary

Profit, revenue, cost variances, flexible budgets, and variance analysis are investigated in this Excel solution.

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