3. Consider the following 2008 data for Newark General Hospitals (in millions of

Question

3. Consider the following 2008 data for Newark General Hospitals (in millions of dollars)________________

__________Simple Budget____________Flexible Budget____________Actual Budget__________________

Revenue______$4.7$___________________4.8_______________________$4.5_____________________ Cost___________4.1____________________4.1 _______________________4.2_____________________ Profit__________0.6____________________0.7_______________________ 0.3_____________________ a Calculate and interpret the two revenue variances_____________________________________________-b-Canculate and interpret the two revenue variances.____________________________________________ c-Calculate and interpret the two cost variances________________________________________________ d-How are the variances related? Finance

Explanation / Answer

a>4.8-4.7 =0.1;4.8-4.5=0.3 hence a>0.1 & 0.3 this means the flexible budget varies more than the simple budget varied. there is an error in consideration of flexible budget b>0.1 & 0.3 this means the flexible budget varies more than the simple budget varied. there is an error in consideration of flexible budget. c>4.1-4.1=0;4.1-4.2= -0.1 the variance between the flexible budget is negative the budget estimated in the flexible was exaggarated where as the simple budget completely agrees with the actual budget which means that that is more precise d>the variances in profit were positive the firm earned more profits than what they estimated 0.1 & 0.4 cheers :)

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