Variance Analysis for Total Laboratory Revenue, Expense and Cost

This article discusses the variance analysis for Total Laboratory Revenue, Expense and Cost. It includes the contribution of each variance component, measures to be taken to improve the contribution margin, and the significance of expense variance.

VARIANCE ANALYSIS
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PART 1
1) 2.61
2) 2.846154
3) 0.050284
4) 0.0513514
5) $13.03793
6) $11.827027
7) $11.43401
8) $11.186842
9) $3.601916
10) $3.75
11) $4.176858
12) $4.3244595
PART 2
1) $34,029
2) $80,053
3) -$89,607
4) $24,475
5) $10,902
6) $25,646
7) $10,922
8) $47,470

9) $904
10) -$939
11) $ 10,958
12) $ 10,922
PART 3
1) Price Variance tends to most significantly contribute to the Total Laboratory Revenue
Variance outcome. This is apparent from the comparison of the magnitude of the answers 1-3
of part 2 where price variance has the highest magnitude. Further, this variance is
unfavourable owing to the actual price realised per procedure is significantly lower than the
corresponding budgeted price per procedure.
2) Intensity variance component contributes most significantly to the Total Laboratory
Expense Variance outcome. This is apparent from the comparison of the magnitude of the
answers 5-7 of part 2 where intensity variance has the highest magnitude. Further, this
variance is unfavourable owing to the actual procedures per patient exceeding the budgeted
procedures per patient and hence leading to higher expense.
3) Supplies expense variance contributes most significantly to the Total Laboratory Cost
Variance outcome. This is apparent from the comparison of the magnitude of the answers 9-
11 of part 2 where supplies expense variance has the highest magnitude. Further, this
variance is unfavourable owing to the actual supplies expense per procedure being
significantly in excess of the corresponding budgeted amount which has led to higher
supplies expense.
4) Expense variance needs immediate attention since it is unfavourable and also highest in
magnitude amongst the three variances. Also, because of this the contribution margin has an
unfavourable variance even though the actual revenue has exceeded has the budgeted
revenues. Thus, it needs to be analysed why the expense has exceeded the budgeted amount
and suitable remedies ought to be introduced in order to ensure that the contribution margin
of the company remains healthy.
5) As the laboratory manager, the following measures would be proposed.

 Supplies expense needs to be rationalised as currently it is the major culprit for
shrinking contribution margins. Either, the budgeted figures from next time period
should be revised upwards or if the supplies expense can be brought down, then
suitable measures should be taken in this regards.
 Considering the significant variance for all there items i.e. revenue, expense and cost,
it is essential that the overall budgetary estimates should be revisited so that the
variance in the future are reduced as both favourable and unfavourable variances
ought to be limited.
 Various costs related to labour and supplies need to be rationalised so as to enhance
the overall margins per procedure per patient.