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# Budgeting, Variance Analysis, and Pricing

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** Please see the attached files for the complete problem description **
I attached a PDF of the instructor notes for this lesson. And word document with the assignment. Course material: Financial Management: Concepts and Applications for Health Care Organizations 4th Ed. Bruce R. Neumann, PH.D, Jan P.Clement,PH.D., Jean C.Cooper,PH.D.

1. Explain, in your own words, the benefits of budgeting for an organization.

2. How does the statistics budget differ from the other types of budget discussed in this unit?

3. How would you describe the budget development process at your current place of employment: is it top-down, bottom-up, or a combination? Explain. (If you cannot use your current employer, you may use a former employer. It does not have to be a health care organization.)

4. How and why do managers use variance analysis?

5. What are "Standard Costs?"

6. Assume that the managers of a hospital are setting the price on a new outpatient service. Here are relevant data estimates6: Variable cost per unit \$5.00 Annual direct fixed costs \$500,000 Annual overhead allocation \$50,000 Expected annual utilization 10,000 visits

a. What per visit price must be set for the service to break even?

b. What per visit price must be set for the service to earn an annual profit of \$100,000?

7. Describe how price may differ from revenues collected from third party payers. What causes the differences?

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#### Solution Preview

** Please see the attached file for a sample budget **

Dear student,

Explain, in your own words, the benefits of budgeting for an organization.

The benefits of budgeting for an organization:
1. The main advantage of budgeting is that it is a wonderful tool for achieving the objectives of the organization. Budgeting helps to make focused efforts for achieving the goals of the organization.
2. Another advantage of budgeting is that it is the financial communicating tool for all the members of the organization about what is expected from them, ie. What they have to achieve in the particular financial period.
3. Budgeting helps the management to evaluate the performance of various managers as once the budget is set and if they are not able to achieve the budget, then it will indicate the inefficiency of the particular manager.
4. Budgeting helps the managers to think ahead by formalizing their responsibilities for planning and makes the managers to set goals and objectives and the policies for achieving those objectives of
their respective departments.
5. Budgeting helps to co-ordinate the efforts of all the individuals in the organization towards the common goal.
6. Budgeting helps to control the costs and the periodical comparison of actual and ...

#### Solution Summary

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