Question

Sue Nugyet, the nurse manager for Six North, does not enjoy reviewing budgetary information and puts off her review until her monthly report is due to her director. The following report is a partial revenue and expense report for her cost center.

Cost Center: Six North Report for May 2005

Actual	This Month’s Budget	Variance	Account Number and Description	Actual	Year to Date Budget	Variance
300,000	350,000	50,000	300 Revenue 005 Routine	3.5 million	3 million	(500,000)
75,000	70,000	(5000)	400 Salary 010 Salaries—Regular	750,000	700,000	(50,000)
5000	4500	(500)	500 Supply Expenses 015 Medical Supplies	40,000	35,000	(5000)

Case Study Questions

Is Nurse Nugyet over or under budget on each of the items? What additional information would be helpful when explaining variances?

Answer 1

Six North Report May 2005
	Actual	Budget	Variance	Over / Under Budget
Revenue	300,000	350,000	50,000	Under
Costs
Salary	75,000	70,000	(5,000)	Over
Supplies Expense	5,000	4,500	(500)	Over

Information about the planned level of activity and the actual activity level for May 2005 would have been useful. If the actual level of activity differs from the planned level, comparison can be misleading. For example, if the planned level of activity was 25,000 patient visits, but the actual level was only 20,000 patient visits, then budgetary control is useless, unless flexible budget is prepared for the actual level of activity. Comparing the actual results against the flexible budget would be more meaningful.