...Variance Analysis Blake Richardson Grand Canyon University HCA-240 March 16, 2013 Variance Analysis To really understand this paper, one should understand what variance analysis does for the entity. Variance analysis is the process of examining every variance between what is actual and budgeted or expected and standard cost to develop reasons as to why the budgeted results were not met. In hospitals, there are many different factors that a financial manager should consider before submitting a variance report to the vice president of the entity. These factors can include staff receiving too much overtime, hired too many staff members for the increase in patients, and maybe even one of the staff members forgot to scan in all of the equipment. Once the problem is recognized and determined it is sent up the chain of command, where the variance reports are interpreted and the expected results are given. In this setting, there could be quite a few factors that had potentially created higher salaries and lower supplies. To determine this we need to look at the changes in input prices, productivity and the changes in departmental volume. (Cleverley, Song, & Cleverley, 2011, p. 386) For a manager to be able to determine this they should first recognize the problem, determine the cause, and then correct the problem. Looking at the efficiency cost, we can determine how long it has been going on for, the loss per time unit, and if the problem is correctable. Once 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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...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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...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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...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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...Budget Management Analysis John Thorpe HCS/571 April 13, 2014 Professor: Amy Reed Budget Management and Variance Analysis Healthcare organizations are faced with severe financial pressures resulting in extreme budget cuts. Consequently, nurse managers and financial managers are tasked with the responsibility of doing more with less while maintaining the high quality of care offered to its consumers. To accomplish the aforementioned tasks, managers use budgetary tools to help them focus on controlling cost while running an efficient operation. Budgeting gives managers the tools necessary to ensure the availability of required resources to meet the organization’s goals and objectives, communicate strategies and monitor results (Cleverly, Song & Cleverly, 2007). Finkler, Kovner & Jones (2007) offer that budgeting should be used to make the organization become more effective and efficient. It is not a tool for maintaining the status quo. Organizations use different approaches to introducing the budgetary process. Some organizations take the current year's budget update it for inflation and projected revenue growth. Others take a clean slate approach; compel managers to justify their expenses and staffing needs on an annual basis. Still other organizations forecast revenue and profit and assign expense rates to departments. However, the most effective budget is one that reflects the true financial position of the organization, provides flexibility and monitored...
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...Manage Finances Within A Budget Submitted by: Nico Antonio A. Serafin Submitted to: Ma’am Lorejen Salise Based on the variance/diversion report of the TAFE Island Holiday Resort, me and my business partner have interpreted the figures listed in the report and have offered remedies to improve their budget performance. This is their income report: Income Actual Budget Variance TAFE Restaurant $233,278 $205,000 $ 28,278 TAFE Bar $ 36,500 $ 51,300 $ (14,800) Island Coffee Shop $ 14,000 $ 18,500 $ (4,500) Room Service $ 1,840 $ 4,450 $ (2,610) Total Income $285,618 $279,250 $ 6,368 Based on this report, we can tell that a certain area of the resort has exceeded the budget therefore having a variance of $28,278. Because of this the resort should be more considerable with their budgeting judgment. They should plan, organize their budget and even motivate their staff in making decisions well. They can also start making another budget plan in this section of the resort. They can use a zero budget system to clearly detect inflated budgets in the beginning of the financial year. The resort should control their budget by checking income and expenditure at regular intervals and identifying and reporting the deviations. As for the other sections of their resort, there is no need for any change. It is because the incomes and the variances did not exceed their targeted budget. Therefore, they can save more if they continue...
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...GSD 0099/06 Class: First Year – Third Semester – Section 2 Submitted to: Ato Mengistu Bogale August 2015 1. Introduction The word budget means the financial plan of business enterprise for the period of specific period. Predicting financial results of organization. Budget is a quantity of plan of action and aid to the coordination and implementation of plan. A budget system builds on historical or actual performance. Moreover, budget is the most widely used method to control resources of profit making and nonprofit making organizations. Preparation of annual budget is mandatory for all organizations because of its unique feature in controlling financial resources of any entities because of its unique feature in controlling financial resources of any organization. It is one of the most of important financial reports produces by the organizations. Budgeting is concerned with implementation of the approved program within long range of plan. The budget translates the long range plan in to annual operating plan. The annual budgeting process lead to the refinement of those plans. Since managers must produce detailed plans for implementation of the long range plan. Generally nowadays most or every organizations are requiring budgeting. It should be available to management tools, but its goes beyond that. The budget express qualitatively and in detail, what the organization or the business plans to do next and what result it expected. It states how available resources...
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...Budgeting and Variance Analysis Report Western Governor’s University Competition Bikes Budgeting and Variance Analysis Report Competition Bikes, Incorporated (Inc.) makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Approximately sixty percent of all race winners have been victorious using bicycles designed by Competitions Bikes, Inc. This extraordinary success rate is a topic of conversation among racers and has led to exponential success for founder Larry Ferguson who formed the company in 2001 in his garage. Competition Bikes is known for quality products and is leader in the market with the CarbonLite products they provide. These results are transparent in the budgets from the last few years; however, the most recent budget contained several unfavorable variances that may be an indication that some changes are needed. Budget planning, identifying unfavorable variance, and correcting those variances can make or break the financial position of a company. The following is a summary report that discussed budgetary areas that raise concern in budget planning; evaluates the flexible budget and its variance; recommends corrections actions for areas of concern based on the variance analysis; and discusses how the concept of management by exception could be applied to the variances. Budget Planning, Allocation of Resources, and Management Control A master budget provides...
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...after the installation of a new financial planning and control system at Boston Creamery, the ice cream division showed a favorable operating income variance of $71,700. In developing the profit plan for 1973, division president (and resident moron) Jim Peterson made the first of a series of inexcusable errors in budgeting surrounding the mythical “favorable” condition. He simply used expected results for the preceding year (as obtained in Oct. 1972), giving no consideration to factors like inflation, market growth, and the fact that sales goals should be expected to increase annually in a successful company. Peterson asked Frank Roberts, inept and underhanded VP of sales and marketing, to identify the cause for this seemingly wonderful news at the next management meeting. Roberts has also been instructed to point out the areas deserving of praise and those in need of reform. The report generated by Roberts is as follows. |Roberts' Variance Schedule | | |Favorable Variance Due to Sales | | | |Volume | |$117,700 | | | |Price | |$12,000 |$129,700 | |Unfavorable Variance Due to Operations | | | |Manufacturing |($99,000.00) | ...
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...Variance Reporting As a manager for a variable department within a hospital, it sounds like I will certainly endure many challenges as it relates to budgeting. But mostly, because I'm faced with the challenge of not having a fixed budget for the department I'm managing. For this purpose I will be the manager of this department with a flexible budget or a variable budget. First we would need to understand what a a variable budget is. Most variable departments run based on luck, because the budget isn't a standard fixed budget its a chance taken each month that expenses will cover each other based on what portions of the budget or under and/or over budget. This sometimes how a variable department operates. We will also examine a variance report. In terms of the budget, a variable budget means that there is no determined dollar amount to allot for certain items in the budget. It is the examination of the deviation of an actual observation from the standard. Of course, in this scenario I don't have to opportunity to have a budget that remains constant, instead I am faced with a flexible budget as it relates to payroll. If I were to receive my monthly budget report and it has imbalanced findings because it is off budget, it would be bit concerning for me. The goal of a financial manager is to provide accurate budgets based on their reporting. Part of my duties include the financial success of the department. Presenting anything that falls short of the projections made by my...
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...Chapter 10 Flexible Budgets and Performance Analysis Solutions to Questions 10-1 The planning budget is prepared for the planned level of activity. It is static because it is not adjusted even if the level of activity subsequently changes. 10-2 A flexible budget can be adjusted to reflect any level of activity—including the actual level of activity. By contrast, a static planning budget is prepared for a single level of activity and is not subsequently adjusted. 10-3 Actual results can differ from the budget for many reasons. Very broadly speaking, the differences are usually due to a change in the level of activity, changes in prices, and changes in how effectively resources are managed. 10-4 As noted above, a difference between the budget and actual results can be due to many factors. Most importantly, the level of activity can have a very big impact on costs. From a manager’s perspective, a variance that is due to a change in activity is very different from a variance that is due to changes in prices and changes in how effectively resources are managed. A variance of the first kind requires very different actions from a variance of the second kind. Consequently, these two kinds of variances should be clearly separated from each other. When the budget is directly compared to the actual results, these two kinds of variances are lumped together. 10-5 An activity variance is the difference between a revenue or cost item in the static planning budget and the same item in...
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...9/1/13 Tirizia York Variance Analysis A variance report involves a way for business executives and department managers to approximate their company’s performance. By examining one set of figures against another, and comparing the planned amount to an actual amount. In the proceeding paragraphs, I will explain how to give a detailed variance report analysis to the vice president of the hospital where I work at, explaining the factors that led up to my salaries for the previous month being higher than the supply figures on my budget reports. It’s the beginning of the month and as I sit at my desk reviewing my previous month’s budget report, I see where my budgeted salaries in my department alone are higher than the supply cost for the previous month. Then while sitting there it comes to me that I have a variance report due to the vice president of my department next week, where will have to give an explanation as to how for the month of June my salaries are higher than my supplies. I see this is going to be a long day so off to the break room to grab a cup of water, and my coffee close my office door and turn on some soft music and” let’s get started”. The first thing on the agenda is to is to run an analysis report that shows the number of employees worked and production along with what supplies were used and the costs of the supplies used. After importing the data on my excel spreadsheet and reviewing the items in red are representing variances with a plus or minus...
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...Assignment 1: Variance Analysis Report In order to perform a variance analysis report Jenkins calculated the actual revenues and expenses and found the difference which was $296,610 in profits. Then Jenkins did the same with budgeted values and found the budgeted profits to be $606,350. The variance amount in turn is $309,960 under budget. Also, the variance amount for revenues is $32,100. This number is favorable due to the fact that they made more than what they had budgeted for. But on the contrary, the variance amount for expenses was $342,060, which was unfavorable because they spent far more than what they had budgeted for. This information would not be sufficient in order to explain to Norton why their profit percentage is nearly half of what they budgeted. This variance analysis report only shows the raw numbers and not any details to why they spent more on expenses than what they budgeted. Jenkins would have a difficult time explaining details to why they went over budget. She would need to show him a detailed expense report of the budgeted items and the actual amount they spent on the items. Then she would have to clearly define which items went over budget and why. This variance analysis report would not help Jenkins in the 8 am meeting she has would need to provide more information. Assignment 2: Preparing the Budget: Variance Analysis Report In order to provide more information to Norton, Jenkins will need to perform a variance analysis report. Jenkins would...
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...Variance Analysis Health care is in itself an extraordinarily intricate business. Health care executives now have to find ways to transform a broken and out of date health cares system by focusing on reducing pointless surgeries and diagnostic test and removing disproportionate health care costs. When the annual budget presents itself and shows that salaries are steadily increasing with supplies decreasing several factors have to be considered when presenting the variance analysis report. Factors that should be considered are the number of staffing, patient bed occupancy, specialist care and supplies. In order to control cost the executive must be able to recognize the problem and its cause and have a solution in place to correct it. Evaluating the current costs against the previous costs of the hospital should suggest to executives which factors have contributed to the change. (Cleverley, Cleverley, Song 2011). In this situation it is the salaries increasing and supplies decreasing. These two factors have to be heavily investigated prior to the analysis report. The first factor to consider will be the increase in salaries that were more than what were budgeted for. The most important and largest asset of the hospital are the people that are employed. In regards to the variance report the first consideration to the employment would be to consider those that are employed under a contract. These costs cannot be controlled, however renegotiating the contract can reduce...
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