Providence Hospital generates monthly performance reports for each of its depart

Question

Providence Hospital generates monthly performance reports for each of its departments. The hospital must maintain an adequate staff of attending and on-call physicians at all times, so physician costs are not affected by the number of patient visits. But all other costs do vary with patient activity. Nurse-hours are used as the activity measure for nurse costs, and patient visits are used as the activity measure for the cost of supplies and other variable costs.

The head physician of the hospital's emergency room, Yolanda Mortensen, is responsible for control of costs. During October, the emergency room unit expected to treat 3,700 patients but actually treated 3,800 patients. The following additional information for October is available:

Budget

Actual

Variance

2,220

2,204

16

$55,500

$32,600

$22,900

$40,700

$29,100

$11,600

$107,900

$106,100

$1,800

Required
Compute the flexible-budget variances for each of the cost categories for October (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers):

1. Nursing Costs....?

2. Supplies and other variable costs...?

3. Fixed Costs...?

Budget

Actual

Variance

Nurse-hours

2,220

2,204

16

Nursing cost

$55,500

$32,600

$22,900

Supplies & other variable costs

$40,700

$29,100

$11,600

Fixed costs

$107,900

$106,100

$1,800

Explanation / Answer

1 Flexible budget Nursing Costs = 55500/2220*2204= 55100 Nursing Costs variance = 55100-32600= 22500 favorable 2 Flexible budget Supplies and other variable costs = 40700/2220*2204= 40407 Supplies and other variable costs variance = 40407-29100= 11307 favorable 3 Fixed Costs variance = 1800 favorable

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