Budgets are a basic management tool used to tie its planning activities to its operating activities. Budgets are important for communicating goals and expectations throughout the organization.

In this assignment, you will prepare static and flexible budgets. You will also perform variance analysis to identify budget to actual differences, and the causes of those variances.

Provided in the table below is information for Apple Hospital's Inpatient Unit #4 for the month of May. The information provided includes whether the costs are fixed (F) or variable (V). Use this information to:

a)    Prepare a flexible budget for Unit #4 for the month of May

b)   Calculate the cost variance for each expense and in total

c)    Calculate the volume variance for each expense and in total

d)   Calculate the management variance for each expense and in total

 

Inpatient Unit #4 Budget Actual Variance Patient Days 810 855 45 Expenses Salaries and Wages V $2,594,322 $ 2,612,823 $(18,501) Benefits V 518,864 520,744 (1,880) Supplies V 56,700 71,290 (14,590) Lease Expense F 20,000 20,800 (800) Depreciation F 10,000 9,940 60 $3,199,887 $3,235,597 (35,710)