Question

8.1 Consider the following 2011 data for Newark General Hospital (in millions of dollars):

                                                  Static           Flexible          Actual

                                                  Budget        Budget          Results

Revenues                               $4.7            $4.8            $4.5

Costs                                       4.1              4.1              4.2

Profits                                      0.6              0.7              0.3

Relationships that apply to the above variances:
Profit variance	=		variance	+		variance
Revenue variance	=		variance	+		variance
Cost variance	=		variance	+		variance

Answer 1

Profit Variance = Actual Profit - Static Profit
Profit Variance = $0.3 - $0.6
Profit Variance = $0.3 (U)
Unfavorable Profit Variance means company has earned less than it planned for
Revenue Variance = Actual Revenues - Static Revenues
Revenue Variance = $4.5 - $4.7
Revenue Variance = $0.2 (U)
Unfavorable Revenue Variance means company has sold less than it planned for
Cost Variance = Static Costs - Actual Costs
Cost Variance = $4.1 - $4.2
Cost Variance = $0.1 (U)
Unfavorable Cost Variance means company has spent more than it planned for