Practice Exercise 15-1: Budgeting Budget assumptions for this exercise include b

Question

Practice Exercise 15-1: Budgeting Budget assumptions for this exercise include both inpatient and outpatient revenue and expense. Assumptions are as follows As to the initial budget The budget anticipated 30,000 inpatient days this year at an average of $650 revenue per day. Inpatient expenses were budgeted at $600 per patient day The budget anticipated 10,000 outpatient visits this year at an average of $400 revenue per visit Outpatient expenses were budgeted at $380 per visit. As to the actual results: Assume that only 27,000, or 90 percent, of the inpatient days are going to actually be achieved for the year The average revenue of $650 per day will be achieved for these 27,000 inpatient days. The outpatient visits will actually amount to 110 percent, or 11,000 for the year. The average revenue of $400 per visit will be achieved for these 1,100 visits. Further assume that, due to the heroic efforts of the Chief Financial Officer, the actual inpatient expenses will amount to $16,100,000 and the actual outpatient expenses will amount to $4,000,000. Reguired 1. Set up three worksheets, in each of your worksheets make two lines for Revenue; label one as Revenue-Inpatient and the other Revenue-Outpatient. Add a Revenue Subtotal line. Likewise, make two lines for Expense; label one as Expense-Inpatient and the other Expense-Outpatient. Add an Expense Subtotal line (See Example from Chapter 13) 2. Using the new assumptions, complete the first worksheet for "As Budgeted." 3. Using the new assumptions, complete the second worksheet for "Actual." 4. Using the new assumptions, complete the third worksheet for "Static Budget Variance." word

Explanation / Answer

Budgeted anticipated As budgeted Inpatient Outpatient Days 30000 10000 Average per day revenue 650 400 Budgeted revenue 19500000 4000000 Less : Expenses(30000*600) (10000*380) -18000000 -3800000 Excess of revenue over expenses 1500000 200000 Actual Inpatient Outpatient Days 27000 11000 Average per day revenue 650 400 Budgeted revenue 17550000 4400000 Less : Expenses -16100000 -4000000 Excess of revenue over expenses 1450000 400000 Actual Budget Static Budget variance Revenue - Inpatient 17550000 19500000 -1950000 Revenue - Outpatient 4400000 4000000 400000 Sub Total 21950000 23500000 -1550000 Expenses - Inpatient 16100000 18000000 -1900000 Expenses - Outpatient 4000000 3800000 200000 Sub Total 20100000 21800000 -1700000 Excess of revenue over expenses 1850000 1700000 150000 The net drop in revenue inpatient is offset by the increase in revenue for outpatient

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