\nDescription
\nBudgeting is an important activity within every health care organization. The particular challenges encountered, however, can vary depending on the type of organization. A state or federally funded organization, for example, will likely have a budget that is allocated to it, and it needs to follow specific guidelines on how the money can be used. A for-profit organization, by contrast, will typically have more influence and flexibility in setting up its budget and making choices on matters such as how much to spend on marketing, patient care, or incentives for employees.
\nIn addition to preparing budgets, as a health care administrator, you must also be able to evaluate whether or not you have achieved your budget using variance analysis. This is important because variance analysis measures the differences between the budget and actual results, and provides administrators with a starting point for correcting financial performance. For this Assignment, you conduct a variance analysis for a health care organization.
\nTo prepare for this Assignment:
\nReview the Week 9 Assignment document provided to you by the Instructor. Examine the budgeted and actual revenues and expenses for a hospital. Reflect on concepts of budgeting and variance. Refer to Chapter 10 and Chapter 11 of Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts and Applications in this week?s Learning Resources for additional guidance.
\nNote: This Assignment will be graded using this rubric: Document: Week 9 Assignment Rubric (Word document)
\nThe Assignment:
\nUsing the ?Week 9 Assignment Budget and Variance Excel Template? address the following:
\nDetermine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable?
\nDetermine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?
\nDetermine the service-related variance for Surgical Volume.
\nDetermine the service-related variance for Patient Days.
\nPrepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Surgical Revenues.
\nPrepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Patient Expenses.
\nDetermine what variances are due to change in volume and what variances are due to change in rates.<\/p>\n
\nHealthcare Financial Management and Economics<\/p>\n
Week 9 Assignment ? Budgeting and Variance Analysis<\/p>\n
Instructions: <\/p>\n
The following are budgeted and actual revenues and expenses for a hospital. <\/p>\n
\t \t\t\tBudgeted\t\t\t\tActual
\nRevenues<\/p>\n
Surgical Volume\t\t\t2,600\t\t\t\t\t2,750<\/p>\n
Gift Shop Revenues\t\t\t$19,500\t\t\t\t$22,000<\/p>\n
Surgery Revenues\t\t\t$602,500\t\t\t\t$750,000<\/p>\n
Parking Revenues\t\t\t$17,000\t\t\t\t$19,000<\/p>\n
Expenses<\/p>\n
Patients Days\t\t\t29,000\t\t\t\t27,500<\/p>\n
Pharmacy\t\t\t\t$120,500\t\t\t\t$147,000<\/p>\n
Misc Supplies\t\t\t$695,000\t\t\t\t$786,000<\/p>\n
Fixed Overhead Costs\t\t$836,000\t\t\t\t$887,000<\/p>\n
Using an Excel spreadsheet to show your calculations:<\/p>\n
1.\tDetermine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable?
\n2.\tDetermine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?
\n3.\tDetermine the service-related variance for Surgical Volume.
\n4.\tDetermine the service-related variance for Patient Days.
\n5.\tPrepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Surgical Revenues.
\n6.\tPrepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Patient Expenses.
\n7.\tDetermine what variances are due to change in volume and what variances are due to change in rates. <\/p>\n
\n\tRevenues\t\t\t\t\t\t\t\t\t\tExpenses\t\t\t\t\t\t\t\t\t<\/p>\n
\t\tGivens:\tBudgeted\t\tActual\t\t\t\t\t\t\tGivens:\tBudgeted\t\tActual\t\t\t\t\t
\n\t[A]\tSurgical volume\t\t\t\t\t\t\t\t\t[A]\tPatient days\t\t\t\t\t\t\t\t
\n\t[B]\tGift shop revenues\t\t\t\t\t\t\t\t\t[B]\tPharmacy\t\t\t\t\t\t\t\t
\n\t[C]\tSurgery revenues\t\t\t\t\t\t\t\t\t[C]\tMiscellaneous supplies\t\t\t\t\t\t\t\t
\n\t[D]\tParking revenues\t\t\t\t\t\t\t\t\t[D]\tFixed overhead costs\t\t\t\t\t\t\t\t<\/p>\n
\t1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable?\t\t\t\t\t\t\t\t\t\t2.?Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?\t\t\t\t\t\t\t\t\t
\n\t\t\tBudgeted\t\tActual\t\tVariance\t\t\t\t\t\t\t\t\t\tVariance\t\t\t
\n\t[E]\tSurgical volume [A]\t\t\t\t\t\t\t\t\t[E]\tPatient days [A]\t\t\t\t\t\t\t\t
\n\t[F]\tGift shop revenues [B]\t\t\t\t\t\t\t\t\t[F]\tPharmacy [B]\t\t\t\t\t\t\t\t
\n\t[G]\tSurgery revenues [C]\t\t\t\t\t\t\t\t\t[G]\tMiscellaneous supplies [C]\t\t\t\t\t\t\t\t
\n\t[H]\tParking revenues [D]\t\t\t\t\t\t\t\t\t[H]\tFixed overhead costs [D]\t\t\t\t\t\t\t\t
\n\t[I]\tTotal variance [E]\t\t\t\t\t\t\t\t\t[I]\tTotal variance\t\t\t\t\t\t\t\t<\/p>\n
\t3. Determine the service related variance for Surgical Volume. \t\t\t\t\t\t\t\t\t\t4. Determine the service related variance for Patient Days.\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\tVariance\t\t\t\t\t\t\t\t\t\tVariance\t\t\t
\n\t[J]\tTotal variance [I]\t\t\t\t\t\t\t\t\t[J]\tTotal variance [I]\t\t\t\t\t\t\t\t
\n\t[K]\tGift shop revenue variance [F]\t\t\t\t\t\t\t\t\t[K]\tAmt. explained by fixed overhead [F]\t\t\t\t\t\t\t\t
\n\t[L]\tParking revenue variance [H]\t\t\t\t\t\t\t\t\t[L]\tOther fixed expenses\t\t\t\t\t\t\t\t
\n\t[M]\tService-related variance [J-K-L]\t\t\t\t\t\t\t\t\t[M]\tService-related variance [J-K-L]\t\t\t\t\t\t\t\t<\/p>\n
\t5. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual surgical revenues. \t\t\t\t\t\t\t\t\t\t6. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual patient expenses. \t\t\t\t\t\t\t\t\t
\n\t\t\tBudgeted\t\tFlexible\t\tActual\t\t\t\t\t\tBudgeted \t\tFlexible\t\tActual\t\t\t
\n\t[N]\tSurgical volume [A]\t\t\t\t\t\t\t\t\t[N]\tPatient days [A]\t\t\t\t\t\t\t\t
\n\t[O]\tSurgical revenue per unit [C \/ A]\t\t\t\t\t\t\t\t\t[O]\tCost per patient day (Pharm + Misc) [B+C]\/[A]\t\t\t\t\t\t\t\t
\n\t[P]\tSurgical revenue [C]\t\t\t\t\t\t\t\t\t[P]\tTotal cost (Pharm+Misc) [N x O]\t\t\t\t\t\t\t\t<\/p>\n
\t7. Determine what variances are due to change in volume and what variances are due to change in rates. \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\n\t\t\tBudgeted\t\tFlexible\t\tActual\t\tVariance\t\t\t\t\t\t\t\t\t\t\t
\n\t[Q]\tBudgeted surgical revenue [P]\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\n\t[R]\tFlexible surgical revenue [P]\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\n\t[S]\tActual surgical revenue [P]\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\n\t[T]\tVolume variance [R – Q]\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\n\t[U]\tRate variance [S – R]\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Description Budgeting is an important activity within every health care organization. The particular challenges encountered, however, can vary depending on the type of organization. A state or federally funded organization, for example, will likely have a budget that is allocated Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-236343","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/236343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=236343"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/236343\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=236343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=236343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=236343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}