Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars):
Static Flexible Actual
Number of Surgeries 1,200 1,300 1,300
Patient Revenue $2,400 $2,600 $2,535
Salary Expense 1,200 1,300 1,365
Non-Salary Expense 600 650 585
Profit $600 $650 $585
The center assumes that all revenues and costs are variable and hence tied directly to patient volume.
A. Explain how each amount in the flexible budget was calculated. (Hint: Examine the static budget to determine the relationship of each budget line to volume.)
B. Determine the variances for each line of the profit and loss statement, both in dollar terms and in percentage terms. (Hint: Each line has a total variance, a volume variance, and a price variance for revenues and management variance for expenses.)
C. What do the Part B results tell Brandon’s managers about the surgery center’s operations for the quarter?