Question

The controller for Rainbow Children’s Hospital, located in Munich, Germany, estimates that the hospital uses 32 kilowatt-hours of electricity per patient-day, and that the electric rate will be 0.20 euro per kilowatt-hour. The hospital also pays a fixed monthly charge of 2,700 euros to the electric utility to rent emergency backup electric generators.

Required:

Construct a flexible budget for the hospital’s electricity costs using each of the following techniques.

1. Formula flexible budget.

2. Columnar flexible budget for 37,000, 47,000 and 57,000 patient-days of activity.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Formula flexible budget. (Round per unit to 2 decimal places.)

Total budgeted monthly overhead cost	=	Budgeted variable overhead cost per activity unit	x	Total activity units	+	Bugeted fixed overhead cost per month
			x	patient days	+

Columnar flexible budget for 37,000, 47,000 and 57,000 patient-days of activity.

Patient Days
	37,000	47,000	57,000
Variable electricity cost
Fixed electricity cost
Total electricity cost	€0	€0	€0

Answer 1

Solution:

Budgeted variable overhead cost per activity unit = 32 kilowatt hours *$0.20 per kilowatt hour = $6.40 per patient day