COMPARING THE BUDGETED REVENUE, THE FLEXIBLE BUDGET REVENUE AND THE ACTUAL REVENUE

The first part is based on question 19 from page 549 in your textbook.

The second part is based on question 11 on page 573 in your textbook.

ADAPTED FROM PROBLEM 19 ON PAGE 549 OF TEXT:

THE GIVENS

• THE ORIGINAL BUDGET NUMBERS
  • HMO would have 100,000 members.
  • 1 in 4 of these members would use the dermatologic services per month (100,000 divided by 4 = 25,000 visits)
  • Budgeted Revenue was $360,000 per month.
  • Budgeted Expenses were $300,000 per month.
• ACTUAL NUMBERS:
  • HMO members increased by 5% to a total of 105,000.
  • 1 in 3 of these members used the dermatologic services per month (105,000 divided by 3 = 35,000 visits).
  • Actual Revenue was $550,000 per month.
  • Actual Expenses were $370,000 per month.

	BUDGETED	ACTUAL	VARIANCE
HMO MEMBERS	100,000	105,000	5,000
# of VISITS per month	25,000	35,000	10,000
REVENUES per month	$360,000	$550,000	$190,000
EXPENSES per month	$300,000	$370,000	$70,000
NET INCOME per Month	$60,000	$180,000	$120,000

COMPARING THE BUDGETED REVENUE, THE FLEXIBLE BUDGET REVENUE AND THE ACTUAL REVENUE

ACTIVITY	ANSWER
A.  ENTER THE BUDGETED REVENUE PER MONTH(from GIVENS)
B. ENTER THE BUDGETED REVENUE PER VISITCalculate the budgeted revenue per visit —this is determined by dividing the budgeted revenues by the budgeted number of visits.
C.  ENTER THE FLEXIBLE BUDGET REVENUE ESTIMATECalculate the flexible budget revenue estimate (what the revenue would have been estimated to be if the actual number of visits had been used)—this is determined by multiplying the budgeted revenue per visit (from B) by the actual number of visits
D.  ENTER THE ACTUAL REVENUE PER MONTH(from GIVENS)
E.  ENTER THE ACTUAL REVENUE PER VISITCalculating the actual revenue per visit (what was actually earned for each visit made) – this is determined by dividing the actual revenue by the actual number of visits.
COMPARE “B” AND “E”. Did the company make more or less per visit than they budgeted for?
COMPARE “C” AND “D”. If the correct number of visits had been estimated initially, would the company have meet, exceeded, or fell short of their budget?

COMPARING THE BUDGETED EXPENSE, THE FLEXIBLE BUDGET EXPENSE, AND THE ACTUAL EXPENSE

ACTIVITY	ANSWER
A.  ENTER THE BUDGETED EXPENSE PER MONTH(from GIVENS)
B. ENTER THE BUDGETED EXPENSE PER VISITCalculate the budgeted expense per visit —this is determined by dividing the budgeted expense by the budgeted number of visits.
C.  ENTER THE FLEXIBLE BUDGET EXPENSE ESTIMATECalculate the flexible budget expense estimate (what the expense would have been estimated to be if the actual number of visits had been used)—this is determined by multiplying the budgeted expense per visit (from B) by the actual number of visits
D.  ENTER THE ACTUAL EXPENSE PER MONTH(from GIVENS)
E.  ENTER THE ACTUAL EXPENSE PER VISITCalculate the actual expense per visit (what was actually spent on each visit made) – this is determined by dividing the actual expense by the actual number of visits.
COMPARE “B” AND “E”. Did the company spend more or less per visit than they budgeted for?
COMPARE “C” AND “D”. If the correct number of visits had been estimated initially, would the company have meet, exceeded, or fell short of their budget?

ADAPTED FROM QUESTION 11 Part A ON PAGE 573 OF TEXT

The administrator of a hospital has decided to allocate the cost of the facility utility bill ($400,000) to the following departments based on the square footage of each department. Fill in the grid with the amount each department would be “billed” for utilities. NOTE: I have changed the square footage in the exercise to make the calculations more straight forward.

DEPARTMENT	SQUARE FOOTAGE	UTILITY ALLOCATION
ADMINISTRATION	5,000
LABORATORY	2,000
DAY-OP SUITE	5,000
CYSTOSCOPY SUITE	2,000
ENDOSCOPY SUITE	6,000
TOTAL	20,000	$400,000