FINANCE 304 Assignment #6SPRING 2020Dr. Ruiz

Instructions: Please use this worksheet to submit your work. Show me all of your work for full credit not just the answers.

Page 181 End of Chapter Problems 6.1 & 6.2

6.1 Consider the fallowing 2016 data for Newark General Hospital (in millions of dollars):

Simple FlexibleActual

BudgetBudget Results

Revenues$4.7$4.8$4.5

Cost4.14.14.2

Profit0.60.70.3

a. Calculate and interpret the two profit variances.

b. Calculate and interpret the two revenue variances.

c. Calculate and interpret the two cost variances.

d. How are interpreted two cost variances.

d. How are variances related?

6.2 Fallowing are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars):

SimpleFlexibleActual

Number of Surgery1,2001,3001,300

Patient Revenue$2,400$2,600$2,535

Salary Expense$1,200$1,300$1,365

Nonsalary Expense$600$650$585

Profit$600$650$585

The center assumes that all revenues and cost are variable and hence tied directly to patient volume.

a. Explain how each amount in the flexible budget was calculated. (hint: examine the simple budget to determine the relationship of each budget line to volume.)

b. determines the variance for each line of the P7L statement, both in dollar terms and percentage terms.

c. what do the results in part b tell Brandon's managers about the center's operations for quarter?