Question

Here are the 2017 revenues for Nu-Kim Radiology for four different budgets:

Static Budget= $150,000

Flexible Enrollment & Utilization Budget= $140,000

Flexible Enrollment Budget= $156,000

Actual Results= $162,000

Interpret each variance:

1) Price

2) Enrollment Variance

3) Utilization Variance

Answer 1

1) Price Variance:

= Actual Revenue - Flexible Revenue

= $162,000 - $ $ 140,000

= $ 22,000 Favorable

( this is favorable variance, so we can assume that company has charged higher prices for its services)

2) Enrollment Variance:

= Flexible (enrollment) Revenues – Static Revenues

= $ 156,000 - $,150,000

= $6000 Favorable

( Enrollment surplus has created favorable variance.)

3) Utilization variance:

= Flexible Enrollment & Utilization - Flexible Enrollment Budget

= $ 140,000 -$ 156,000

= $ 16,000 unfavorable

( utilization was high, so it created a unfavorable variance.)