The administrator of Appomattox Nursing Home is very aware of needing to keep his cost down since he just negotiated a new arrangement with a large insurance company that will pay him a fixed amount per patient day. Listed below are budgeted and actual expenses for the previous month.
Actual patient days were 30,000 compared to budgeted patient days of 24,000.
Budgeted Costs @ 24,000 Patient Days | Budgeted Cost Per Unit | Actual Costs @ 30,000 Patient Days | |
Pharmacy Costs Variable | $100,000 | $4.167 | $140,000 |
Misc Supplies Costs Variable | $56,000 | $2.333 | $67,500 |
Fixed Overhead Costs | $708,000 | $29.50 | $780,000 |
Total | $864,0000 | $36.00 | $987,500 |
a. Determine the total variance associated with the planned and actual expenses.
b. Prepare a flexible budget of expense at 30,000 patient days.
c. Determine the “Spending Variance” which is defined as Actual costs less costs budgeted at actual volume.