Question 1: Why are planning and budgeting so important to an organizations success?
Question 2: Briefly describe the planning process. Be sure to include summaries of the strategic, operating and financial plans.
Question 3: Describe the components of a financial plan.
Consider the following hospital data:
Static budget Flexible Budget Actual results
Revenues $4.7 $4.8 $4.1
Costs 4.1 4.1 4.2
Profits 0.6 0.7 0.3
a) Calculate and interpret the profit variance.
b) Calculate and interpret the revenue variance.
c) Calculate and interpret the cost variance.
d) Calculate and interpret the volume and price variance on the revenue side.
e) Calculate and interpret the volume and management variances on the cost side.
f) How are the variances calculated above related?