Refer to Carroll Clinic’s 2020 operating budget contained in exhibit 8.3. Instead of the actual results reported in exhibit 8.4, assume the results reported below:

a. Construct Carroll’s flexible budget for 2020.

b. What are the profit variance, revenue variance, and cost variance?

c. Consider the revenue variance. What is the component volume variance? The price variance?

d. Break down the cost variance into volume and management components.

e. Break down the management variance into labor, supplies, and fixed costs variances.

f. Break down the labor and supplies variances into rate/price and efficiency/usage components.
g. Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.

Exhibit 8.3

Exhibit 8.4

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I. Volume: Carroll Clinic: New 2020 Results A. FFS B. Capitated lives 30,000 34,000 visits members Number of member-months 360,000 Actual utilization per member-month 0.12 Number of visits 43,200 visits C. Total actual visits II. Revenues: 77,200 visits A. FFS $ 28 per visit 34,000 actual visits $ 952,000 B. Capitated lives $ 2.75 PMPM x 360,000 actual member-months $ 990,000 C. Total actual revenues $1,942,000 III. Costs: