Refer to Carroll Clinic’s 2021 operating budget, contained in exhibit 6.2. Instead of the actual results reported in exhibit 6.3, 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 presented in the chapter.

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1. Volume (Number of Visits) Payer A 11,000 Payer B 12,000 Total 23,000 II. Reimbursement (per Visit) Payer A $95 Payer B $95 III. Costs Variable costs: Supplies Fixed costs: Labor Overhead $ 350,000 $1,000,000 500,000 Total $1,500,000 IV. P&L Statement Revenues: Payer A Payer B Total revenues Variable costs Fixed costs Profit Total $1,045,000 1,140,000 $2,185,000 $ 350,000 1,500,000 $1,850,000 $335,000