Budgeting Case Study: Variance Analysis for Surgical Volume and Patient Days

This case study analyzes the variance between planned and actual budgets for surgical volume and patient days. It includes a flexible budget estimate and identifies variances due to changes in volume and rates.

Assignment- Week 9
Budgeting
Case Study
1.0 (a) Determine the total variance between the planned and actual budgets for
Surgical Volume. Is the variance favorable or unfavorable??
The total variance computed on the basis of planned and actual budget is Dollar 1,99,648.
The variance has been computed taking gift shop revenue, surgery revenue and parking
revenue. The variance under each of the heads are favourable and has tolled at Dollar
480, dollar 1,98,288 and dollar 880. Further, the positive variance indicate revenue is
excess of estimated amount.
(b) Determine the total variance between the planned and actual budgets for Patient
Days. Is the variance favorable or unfavorable??
The Variance has been computed on the basis of actual and budget data. The patient days
have decreased in the actual data. Further, the following expenses have been taken into
consideration for computation of variance:
 Pharmacy Expense;
 Miscellaneous Supply;
 Fixed Overhead Costs.
The variance computed were unfavourable and tolled at dollar 33,107 (unfavourable) for
pharmacy expense , dollar 1,49,643 (unfavourable), dollar 1,08,l714 (unfavourable). On
the basis of above, total variance for patient days tolled at dollar 2,91,464 adverse.
C) Determine the service-related variance for Surgical Volume.
For computation of service related variance, the following variances have been deducted
from total variances:
 Gift Shop Revenue Variance;
 Parking Revenue Variance.
Total variance [I] $1,99,648
Gift shop revenue variance [F] $480
Parking revenue variance [H] 880
Service-related variance [J-K-L] 1,98,288
The service related variance computed is favourable.
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D) Determine the service-related variance for Patient Days
For computation of service related variance, the following variances have been deducted
from total variances
 Fixed Overhead Costs.
Total variance [I] ($2,91,464)
Amt. explained by fixed overhead [H] ($1,08,714)
Other fixed expenses No data given
Service-related variance [J-K-L] -1,82,750
‘
The service related variance that has been computed is unfavourable representing excess
expenditure than estimated.
E) Prepare a flexible budget estimate. Present side-by-side budget, flexible budget
estimate, and the actual Surgical Revenues.?
The flexible budget implies the budgeted income per surgical volume multiplied by actual
volume that was carried out during the year.
Budgeted Flexible Actual
Surgical volume [A] 2,500 2,800 2,800
Surgical revenue per unit [C / A] $237.04 $237.04 $307.86
Surgical revenue [C] $5,92,600 $6,63,712 $8,62,000
On the basis of the above, it can be seen that actual revenue exceeds the budgeted revenue
and flexible revenue.
F) Prepare a flexible budget estimate. Present side-by-side budget, flexible budget
estimate, and the actual Patient Expenses.
The flexible budget implies the budgeted expense per patient days multiplied by actual
patient-days that was carried out during the year.
Budgeted Flexible Actual
Patient days [A] 28,000 26,000 26,000
Cost per patient day (Pharm + Misc)
[B+C]/[A] $29.13 $29.13 $36.15
Total cost (Pharm+Misc) [N x O] $8,15,500 $7,57,250 $9,40,000
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G) Determine what variances are due to change in volume and what variances are
due to change in rates.
The computation of the same has been detailed here-in-below:
Budgeted
Budgeted surgical revenue [P] $5,92,600
Flexible surgical revenue [P] $6,63,712
Actual surgical revenue [P] $8,62,000
Volume variance [R - Q] $71,112
Rate variance [S - R] $1,98,288
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