Again refer to Carroll Clinic’s 2021 operating budget, contained in exhibit 6.2. Instead of the actual results reported in exhibit 6.3 or listed in problem 3, assume the following results:

a. What are the profit, revenue, and cost variances based on the simple (exhibit 6.2) budget?

b. Construct Carroll’s flexible budget for 2021.

c. What are the profit, revenue, and cost variances based on the flexible budget?

d. Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration.

Transcribed Image Text:

Carroll Clinic: New 2021 Results 1. Volume (Number of Visits) Payer A Payer B Total II. Reimbursement (per Visit) Payer A Payer B III. Costs Variable Costs: Supplies Fixed Costs: Labor 8,500 11,000 19,500 $ 90 $ 80 $ 320,000 $1,050,000 Overhead 550,000 Total $1,600,000 IV. P&L Statement Revenues: Payer A Payer B Total revenues Variable costs Fixed costs Total Profit $ 765,000 880,000 $1,645,000 $ 320,000 1,600,000 $1,920,000 ($275,000)