Question: You are a new budget analyst at Helping Hands Hospital, a tertiary care medical center. You report to the chief financial officer (CFO). It is your first day of reporting to the CFO, and he welcomes you and presents you with the following assignment to test your knowledge in health care finance.
- Describe how variance analysis can be applied to flexible and static budgets.
- Explain why forecasts are typically determined using sensitivity analysis.
- Explain the type of questions that sensitivity analysis deals with and how it correlates to forecasting.
- Describe contribution margin and the break-even point using the contribution margin method.