...HCA 240 April, 29 2012 Moiz Lalani Variance Analysis Variance Analysis is used to promote management action in the earliest stages. It is the process of examining in detail each variance between actual and budgeted costs to conclude the reasons as to why the budgeted amount was not met (Ventureline, 2012). There are several factors that go into a variance report. One is the assumption of the department. The second is the risk of the assumption. And thirdly the actual expense used to portray the budget. The vice president announces the budget that needs to be met monthly. Upon receiving the monthly budget results, the materials budget was not used properly, and the salary was higher than the planned budget. I will be explaining the reasons as to why the salary bases were higher than the given amount, and the reasons why the materials budget were not met, and also what needs to be done in future to prevent from having to exceed the salary amount. When receiving the monthly budget at the beginning of the month, the managers have to assume how to use the budget amount given wisely. Given that the employees need materials to get the job done, there are separate budget amounts for specific areas that need to be dispersed accordingly. For example, working at a health care industry in the materials management department, the supplies that are needed for the department need to be available in order for the department to run such as: computers, handheld inventory scanners, and carts...
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...Leslie M. Rogakis HCA 240-0500 03/29/2015 Professor Tirizia York Variance Analysis A variable department manager has many factors to consider when interpreting and analyzing a variance report. Variances can be attributed to factors such as increased or decreased volume, wage increases, cost increases for equipment and cost increases for supplies. Variance reports are a tool that can be utilized to analyze how well a company is doing with meeting current budgetary goals as well as a means for forecasting information for future budgets. In preparing a variance analysis report to be presented to the vice president, the information needs to be simple enough to understand easily, but detailed enough for the information to be useful to the person reading the report. To ensure a well-rounded variance report it should include information such as budgeted values, the actual values for the specific term as well as the overall variance. This paper will explain the relationships between variance reporting, interpreting or analyzing variance report results, and actual results of performance. A variance report is a valuable tool used to analyze a company’s or a specific department’s performance in a given period. When variances in wages occur, there are several factors that could have contributed to that variance. Such factors include higher than expected patients admittance, longer than average patient days and possibly wage increases awarded to staff. An additional factor could...
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...Variance analysis Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Sales | | | | | Oct | £40,000 | £38,500 | £1500 favourable | There may have been a decrease in the number of competitors in the market or they could have advertised really well. | Nov | £45,000 | £47,000 | £2000 adverse | There may have been an increase in competition in the marketAnd a decrease in demand for the products | Dec | £52,000 | £56,000 | £4000 adverse | There may have been an increase in competition in the marketAnd a decrease in demand for the products | Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Raw materials | | | | | Oct | £6000 | £5,700 | £300 favourable | They could’ve found a cheaper supplier or there may be a drop in sales | Nov | £8000 | £8,100 | £100 adverse | They may have overspent on raw materials or made more sales meaning they needed to use more electricity and raw materials | Dec | £8000 | £8,500 | £500 adverse | They may have overspent on raw materials or made more sales meaning they needed to use more electricity and raw materials | Item | Budget | Actual | Variance favourable/ adverse | Possible reason for variance | Wages | | | | | Oct | £6000 | £5,600 | £400 favourable | This could be because they didn’t need seasonal staff in October meaning that they didn’t need to give employees as many hours as they thought. | Nov | £6,500 | £6,350 | £150 favourable...
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...bubbler was bubbling more air than the air. Discuss why this happened. | 4 | Small bubble size | Present | Much less bubble formation | Present at top | Turbulent | 5 | Medium sized bubbles. Bigger than run 3. | No vortex seen | Less bubble formation | Less foam | Bubbles were seen evenly generated from both bubblers | 6 | Medium sized | Present | Evenly distributed in the bulk with a lot present near baffles | Present at top | Turbulent | 7 | Large | No vortex seen | | No Foam | Bubbles were evenly formed from both bubblers | 5.3 Analysis of Variance in parameters based on pooled data Variance in data was observed in each set of experiments due to a number of factors. These factors include stirrer speed, oxygen content, and the different sizes in air stones. From the ANOVA illustrated in Figure 1, the sources X1, X2, X3, X4 are oxygen flow rate, stone size, stirrer speed, and groups respectively. It is seen that the largest variance occurs at the stirrer speed parameter, with a F value of 24.71 as compared to oxygen flow rate at 1.82, stone size at 1.98 and groups at 0.15. This shows that the stirrer speed plays the most significant role in the variation between the sets of data. One of the reasons that might have caused this outcome was the formation of a vortex at high stirrer speeds. Although a high stirrer speed is needed for even mixing, the vortex formed creates a vacuum around an area this disrupts the mixing of the oxygen. Another factor that might have caused...
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...Variance Analysis A manager of a variable hospital department has many responsibilities. The manager is accountable for budgeting and to protect profits. The financial manager is responsible for guarding overspending and generating profits. They are active in the budgeting process throughout the fiscal year. The budget department manager communicates with other managers, and accounting departments concerning budget issues, financing, and concerns in the organizations departments. Sometimes situations occur whereas payroll salaries are high and supplies are lower than planned and budgeted. The budget manager is responsible for providing feedback about finances, revenue, and any potential variances in the budgeted costs. This essay will be based on a scenario of salaries that were higher and supplies lower than initially budgeted. This paper will explore variances in the scenario mentioned earlier, and explain the relationship between variance reporting, interpreting variance reporting results, and the results of performance within a health care organization. The hospital variable department has experience a case in which employee salaries are higher than budgeted, while the supplies are lower than initially budgeted. This is the result of an epidemic of asthma patients who were admitted to the hospital over the last three months. The hospital approved overtime to assist in the growing number of patients and to accommodate their needs. In the process of caring for patients more...
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...Variance analysisCh 8 Variance analysis The complete list of common variances, together with some potential causes, is as follows: The variance and its calculation | Potential causes of the variance | Material variancesMaterial price variance:Amount of material actually used at actual price compared to what that amount of material should have cost if bought at standard price/unit. | * Wrong standard cost/unit of material * The price of material changed since the standard was set * Exchange rate movements affecting the price of imported material * Poor/excellent buying decisions and negotiation | Material usage variance:Amount of material actually used compared to the standard amount that should be used for the actual output achieved, evaluated at the standard cost | * Wrong standard usage/unit of production * Material of a different quality being purchased (yield affected) * Poor/excellent use of material * Poor/excellent maintenance of machines | Labour variancesLabour rate variance:Amount of labour actually paid for at the actual hourly rate compared to what that amount of labour should have cost if bought at standard hourly rate. | * Wrong standard rate/hour * Unexpected rate of wage inflation * A different mix of labour | Labour efficiency variance:Amount of hours actually worked compared to the standard amount that should be worked for the actual output achieved, evaluated at the standard rate per hour. | * Wrong standard hours per...
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...Sharrain Walls Variance Analysis Grand Canyon University: HCA-530 July 5, 2016 Introduction Various reports help with viewing and keeping track of the productivity of a department. Managers find these reports very helpful with assisting to find an issue, trend, overspending, and underspending. A report commonly used is a variance report, which compares the planned amount to the actual amount. This report is critical in determining major decisions and viewing fluctuations. The report can be in the form of a table or graph and can be considered favorable or unfavorable based on the results. Vice Presidents look for the report to be clear and direct. Managers should include all factors associated with the variance report as well as the relationships between variance reporting, interpreting variance report results, and actual reports. Variance Analysis When viewing the results of the report consider the hospital size and utilization of the services offered by the hospital. When performing a variance analysis, relationships can be identified. Favorable (positive) and unfavorable (negative) correlations are critical in business planning. An example would be, variance analysis may show that when sales for product a rise in sales for product B. This type of relationship may be used for success of other products (Cross, N.d.). When using a variance report for forecasting variance data allows managers to identify factors such as seasonal changes for the favorable and unfavorable...
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...16 Chapter Sixteen Fundamentals of Variance Analysis LEARNING OBJECTIVES After reading this chapter, you should be able to: L.O.1 Use budgets for performance evaluation. L.O.2 Develop and use flexible budgets. L.O.3 Compute and interpret the sales activity variance. L.O.4 Prepare and use a profit variance analysis. L.O.5 Compute and use variable cost variances. L.O.6 Compute and use fixed cost variances. L.O.7 (Appendix) Understand how to record costs in a standard costing system. For the second month in a row, profits at our Bayou Division are down and I don’t know why. We budgeted $190,000 in profit for August, but the actual result was only $114,500. We thought we had developed realistic monthly budgets. I know sales were down some, but I’m not sure that is the only problem there is. I am not one who believes that favorable variances are always “good” and unfavorable variances are always “bad.” [See the In Action item, “When a Favorable Variance Might Not Mean ‘Good’ News.”] I need more information from the analysis if I am going to turn things around. What I need to know is whether we should focus on improving the marketing of the division or if we need to take a look at our manufacturing operations. We don’t have a lot of extra resources here at Corporate, so I have asked Philippe [Broussard, the president of Bayou] to identify the primary cause of the shortfall—revenues or costs—and report back to me next week. If Bayou can’t improve, we may have to dispose of...
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...Variance Analysis A variance is the difference between an actual result and an expected result. The process by which the total difference between standard and actual results is analysed is known as variance analysis. When actual results are better than the expected results, we have a favourable variance (F). If, on the other hand, actual results are worse than expected results, we have an adverse (A). I will use this example throughout this Exercise: Standard cost of Product A $ Materials (5kgs x $10 per kg) 50 Labour (4hrs x $5 per hr) 20 Variable o/hds (4 hrs x $2 per hr) 8 Fixed o/hds (4 hrs x $6 per hr) 24 102 Budgeted results Production: 1,200 units Sales: 1,000 units Selling price: $150 per unit ACTUAL Results Production: 1,000 units Sales: 900 units Materials: 4,850 kgs, $46,075 Labour: 4,200 hrs, $21,210 Variable o/hds: $9,450 Fixed o/hds: $25,000 Selling price: $140 per unit 1. Variable cost variances Direct material variances The direct material total variance is the difference between what the output actually cost and what it should have cost, in terms of material. From the example above the material total variance is given by: $ 1,000 units should have cost (x $50) 50,000 But did cost 46,075 Direct material total variance 3, 925 (F) It can be divided into two sub-variances The direct material price variance This is the difference between what the actual quantity of material used...
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...Variance Analysis To complete the following assignment, go to this week's Assignment link in the left navigation. Volume, Risk, and Price Variances Analyze the variances in the following scenario: You are the nursing administrator for a medical group that expects a severe outbreak of the flu this winter. You hire additional staff to treat the patients and administer shots. Your special project budget was for 1,000 hours of part-time nurses’ services at $40 per hour, for a total cost of $40,000. It was expected that these nurses would administer 400 flu shots and treat 1,600 flu patients. The medical group typically charges $50 for a flu shot and $80 for treating a flu patient. Actually, the group had 1,200 patients who received the flu shot and 1,400 who had the flu and received treatment. On average, it was able to collect $55 per flu shot and $70 per flu patient. Compute the volume, mix, and price revenue variances. How did things turn out for the group considering just revenues? How did they turn out from a profit perspective? Use either the approach from chapter 8 or from Appendix 8-A to solve. Clearly label the calculations of the required variances using Excel. Use formulas to calculate the three variances and format the cells to insert a comma if there is more than three numbers and round to the nearest whole number. Explain the meaning of the variances in a two page Word document. Submit to your instructor your two-to-three page Word document...
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...PAPER NOT MINE. DIRECT MATERIALS VARIANCES: Materials purchase price variance Formula: Materials purchase price variance = (Actual quantity purchased × Actual price) – (Actual quantity purchased × Standard price) Materials price usage variance formula Materials price usage variance = (Actual quantity used × Actual price) – (Actual quantity used × Standard price) materials quantity / usage variance formula Materials price usage variance = (Actual quantity used × Standard price) – (Standard quantity allowed × Standard price) Materials mix variance formula (Actual quantities at individual standard materials costs) – (Actual quantities at weighted average of standard materials costs) Materials yield variance formula (Actual quantities at weighted average of standard materials costs) – (Actual output quantity at standard materials cost) DIRECT LABOR VARIANCES: Direct labor rate / price variance formula: (Actual hours worked × Actual rate) – (Actual hours worked × Standard rate) Direct labor efficiency / usage / quantity formula: (Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate) Direct labor yield variance formula: (Standard hours allowed for expected output × Standard labor rate) – (Standard hours allowed for actual output × Standard labor rate) FACTORY OVERHEAD VARIANCES: Factory overhead controllable variance formula: (Actual factory overhead) – (Budgeted allowance based on standard hours allowed*) ...
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...1. The variance analysis schedule that Frank Roberts proposed was not necessarily the best representation of the variances for Boston Creamery. Roberts’ report stated a favorable variance of $71,700 coming mainly from sales volume. He used the revised budgeted operating income and the original budgeted income to come up with the sales volume number. The budget was not detailed as to what accounted for the differences though. That would be the first change to the variance analysis report, provide a clearer depiction of the results. He should show the effect of the changes in market size. The market size variance was actually 117,642 favorable (5,968,366-5,720,329). The suggestions offered by Jim Peterson can be incorporated into the schedule without being too technical. There may be a lot of numbers but the results are far more informative. By also looking at month to month changes to sales and operational costs they would have a better estimate and the figures would be available sooner rather than waiting until the spring of 1973. John Vance’s appendix breaks the profit planning analysis down month by month and he shows the importance of tracking actual results. For example, in January 520,000 gallons of ice cream were actually sold. They based the analysis on the forecast of only 495,000 gallons. The actual revenues for January are $28,875 under the forecast for the actual sales. The earnings statement, which is Exhibit C in the Appendix to the Case, shows that the...
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...Budget Variance Every hospital faces many challenges, but one of the most difficult challenges is knowing how to manage expenses. When a hospital is planning their budget not only do they have to plan a budget that is beneficial for their staff but also high level care for their patients. With so much in society changing such as technology, increase health care cost, and government restrictions it makes planning the budget very challenging. In order to analyze how expenses are being spent compared to the budget that is allotted for them, budget variances have to be made (accountingtools.com, 2013). These variances have to be extremely well detailed in order to make an accurate budget for the following year. Things that should be taken into consideration when doing a budget variance are variance reports, interpreting the results of variance reports and analyzing these reports based on actual performance, and developing a way to better the budget based on these results. The purpose of this paper is to fully analyze all factors that should be considered for a budget variance for a hospital. The very first step for a budget variance is to develop a variance report (accountingtool.com, 2013). There are various factors that should be analyzed to produce a proper variance report such as how many beds are available, how many patients are seen daily, how much staff is available or working in a specific day, how many supplies will be used, and how much utilities such as electricity...
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...reasons for the favorable operating income variance of $71,700. The first major reason for the favorable operating income variance of $71,700 is that there have been higher sales volume than that forecasted. Essentially, higher sales volume has been responsible for the favorable operating income variance. The actual net sales are $9,657,300, whereas, the budgeted sales volume was $9,645,300. On the other hand unfavorable variance due to operations have actually decreased the favorable operating income variance by $46,000. Specifically, the major reason for the favorable operating income variance is the higher actual sales than planned sales of product D and product E. The planned product sales of product D was 20,000 units instead 36,000 units were sold and the planned sales of product E was 8,000 units, instead 28,000 units were sold. The basis reason for the favorable profit variance was that Midwest's actual sales volume was higher than forecast. How can an analysis of the profit variance highlight those areas needing management attention? The analysis of profit variance can show can highlight those areas that need management attention. Particularly in case of Midwest is that the variance due to operations was unfavorable. This means that areas where the costs have been higher than the budgeted costs require corrective measures. If we consider the manufacturing cost, the variable costs show that milk price variance and sugar price variance have been responsible for unfavorable...
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...Sarah Carter Boston Creamery 1. The variance analysis schedule that Frank Roberts proposed was not necessarily the best representation of the variances for Boston Creamery. Roberts’ report stated a favorable variance of $71,700 coming mainly from sales volume. He used the revised budgeted operating income and the original budgeted income to come up with the sales volume number. The budget was not detailed as to what accounted for the differences though. That would be the first change to the variance analysis report, provide a clearer depiction of the results. He should show the effect of the changes in market size. The market size variance was actually 117,642 favorable (5,968,366-5,720,329). The suggestions offered by Jim Peterson can be incorporated into the schedule without being too technical. There may be a lot of numbers but the results are far more informative. By also looking at month to month changes to sales and operational costs they would have a better estimate and the figures would be available sooner rather than waiting until the spring of 1973. John Vance’s appendix breaks the profit planning analysis down month by month and he shows the importance of tracking actual results. For example, in January 520,000 gallons of ice cream were actually sold. They based the analysis on the forecast of only 495,000 gallons. The actual revenues for January are $28,875 under the forecast for the actual sales. The earnings statement, which is Exhibit C in the...
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