Question

Detailed variance analysis. A dermatology clinic expects to contract with an HMO for an estimated 100,000 enrolees. The HMO expects one in four of its enrolled members to use the dermatology services per month. At the end of the year, the dermatology clinic's business manager looker at her monthly figures and saw tha the number if enroleed members had increased by 5 percent over the budgeted amount and that one in three of the HMO members had used the dermatology services per month. Net monthly revenues of the dermatology clinic were budgeted at 360,000 but were actually 550,000. Monthly expenses for the clinic were budgeted at 300,000 but were actually 370,000. a. Prepare monthly revenue volume variance report for the clinic. b. Prepare monthly revenue rate variance report for the clinic. c. Prepare monthly expense volume variance report for the clinic. d. Prepare monthly expense cost variance report for the clinic.

Answer 1

Budgeted Monthly revenue = Net Budgeted Monthly revenue + Monthly budgeted expense = $360000 + $300000 = $660000
Actual monthly revenue = Net Actual Monthly revenue + Monthly Actual expense = $550000 + $370000 = $920000
Variance Report
	Budgeted	Actual	Variance		Reason
Revenue	$660,000	$920,000	($260,000)	Favourable	Rise in revenue
Expense	$300,000	$370,000	($70,000)	Unfavourable	Rise in cost
Net Revenue	$360,000	$550,000	($190,000)	Favourable	Rise in net revenue