Problem - Detailed Variance analysis
The following are planned and actual revenues for Cutting Edge Surgery Center. Sine they are one of four surgery cents in the community, the administrator is very concerned with his rates in relation to those of his competitors.
Planned Actual
Surgical volume 1,200 1,400
Gift shop revenues $12,000 $15,000
Surgery Revenues $500,500 $750,750
Parking Revenues $15,000 $17,000
a. Determine the total variance between the planned and actual budgets.
b. Determine the service- related revenues and calculate variance still unexplained.
c. Prepare a flexible budget estimate. Present side-by-side the budget, flexible budget estimate, and actual surgical revenue (and related volumes).
d. Determine what variance is due to change in volume and what variance is due to change in rates.
e. Determine the volume variance and rate variance based on per unit rates.