Question

A hospital manager budgeted $100,000 for monthly nursing expenses in the hospital’s well-baby clinic. The manager expected that the clinic would treat 5,000 babies and pay its nurses $40 per hour. Instead, the clinic treated 6,000 babies and used 3,200 hours of nursing time at $37.50 an hour. Calculate the total, quantity, price, and volume variances for nursing expenses during the month. Briefly explain your answers.

Answer 1

TB	Total budget	100000	$
EB	Expected babies treated	5000	babies
P	Hourly rate , Price	40	$/hour
Q	Hours expected (Quantity)	2500	Hours	(TB/P)
AB	Actual babies treated	6000	babies
P'	Actual hourly rate, price	37.5	$/hour
Q'	Hours used (Quanity)	3200	Hours
TC'	Total cost	120000	$
	Total variance
	(TC'-TB)	20000	$	Ans
	Quantity variance
	Q'-Q	700	hours	Ans
	Price variance
	(Actual unit cost - Standard unit cost) * Actual Quantity Purchased
	(P'-P)*Q'	-8000	$	Ans
	Volume variance
	(Q'-Q)*P	28000	$	Ans