Refer to Carroll Clinic's 2011 operating budget contained in Exhibit 8.3, Instead of the actual results reported in Exhibit 8.4, assume the resultsreported below:
Carroll Clinic: New 2011 Results
/. Volume:
A. FFS34,000visits
B.Capitated lives30,000members Number of member-months360,000
Actual utilization per
member-month0.12
Number of visits43,200 visits
C.Total actual visits77,200 visits
II.Revenues:
A.FFS$28per visit
X 34,000actual visits$952,000
B. Capitated lives$2.75PMPM
X 360,000 actual member-months $990,000
C.Total actual revenues$1,942,000
III. Costs:
A. Variable Costs:
Labor$1,242,000 (46,000 hours at $27/hour)
Supplies126,000 (90,000 units at $1.40/unit)
Total variable costs$17.72 ($1,368,000 / 77,200)
B. Fixed Costs
Overhead, plant,
and equipment$525,000
C. Total actual costs$1,893,000
IV. Profit & Loss Statement:
Revenues:
FFS$952,000
Capitated$990,000
Total$1,942,000
Costs:
Variable:
FFS$602,487
Capitated765,513
Total$1,368,000
Contribution Margin$574,000
Fixed Costs525,000
Actual profit$49,000
Construct Carroll's flexible budget for 2011.
What are the profit variance, revenue variance, and cost variance?
Consider the revenue variance. What is the component volume variance? The price variance?
Break down the cost variance into volume and management components.
Break down the management variance into labor, supplies, and fixed cost variances.
Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.