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Healthcare Finance Accounting Question

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The administrator of Appomattox Nursing Home is very aware of needing to keep his cost down since he just negotiated a new arrangement with a large insurance company that will pay him a fixed amount per patient day.  Listed below are budgeted and actual expenses for the previous month.

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Actual patient days were 30,000 compared to budgeted patient days of 24,000.

 

Budgeted Costs @ 24,000 Patient Days Budgeted Cost Per Unit Actual Costs @ 30,000 Patient Days
Pharmacy Costs Variable $100,000 $4.167 $140,000
Misc Supplies Costs Variable $56,000 $2.333 $67,500
Fixed Overhead Costs $708,000 $29.50 $780,000
Total $864,0000 $36.00 $987,500

 

a. Determine the total variance associated with the planned and actual expenses.

 

b. Prepare a flexible budget of expense at 30,000 patient days.

 

c.  Determine the “Spending Variance” which is defined as Actual costs less costs budgeted at actual volume.

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