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Consider the following 2011 data for Newark General Hospital (in millions of dollars) Static Flexible Actual Budget Budget Results Revenues $4.7 $4.8 $4.5 Cost 4.1 4.1 4.2 Profits 0.6 0.7 0.3 a. Calculate and interpret the profit variance. Profit variance = Actual profit – Static profit Answer? Interpret your Profit Variance results? b. Calculate and interpret the revenue variance. Revenue Variance = [Actual Revenues – Static Revenues] Answer? Interpret your Revenue Variance results? c. Calculate and interpret the cost variance. Cost Variance = [Static Cost – Actual Cost] Answer? Interpret your Cost Variance results? What is the net effect of the revenue and cost variance? Hint: Take the revenue +cost variance= profit variance d. Calculate and interpret the volume and price variances on the revenue side. -Volume variance = Flexible Revenues – Static Revenues Volume variance =? Interpret your Volume Variance results? -Price variance = Actual revenues-Flexible revenues Price Variance= ? Interpret your Price Variance results? e. Calculate and interpret the volume and management variances on the cost side. -Volume variance (on cost side) = Static costs – Flexible costs Volume Variance (on cost side) =? Interpret your Volume Variance results? -Management variance = Flexible costs – Actual costs Management Variance = ? Interpret your Management Variance results? f. How are the variances calculated above related?

Consider the following 2011 data for Newark General Hospital (in millions of dollars)

Static Flexible Actual Budget Budget Results Revenues $4.7 $4.8 $4.5 Cost 4.1 4.1 4.2 Profits 0.6 0.7 0.3

a. Calculate and interpret the profit variance. Profit variance = Actual profit – Static profit Answer? Interpret your Profit Variance results? b. Calculate and interpret the revenue variance. Revenue Variance = [Actual Revenues – Static Revenues] Answer? Interpret your Revenue Variance results? c. Calculate and interpret the cost variance. Cost Variance = [Static Cost – Actual Cost] Answer? Interpret your Cost Variance results? What is the net effect of the revenue and cost variance? Hint: Take the revenue +cost variance= profit variance d. Calculate and interpret the volume and price variances on the revenue side. -Volume variance = Flexible Revenues – Static Revenues Volume variance =? Interpret your Volume Variance results? -Price variance = Actual revenues-Flexible revenues Price Variance= ? Interpret your Price Variance results? e. Calculate and interpret the volume and management variances on the cost side. -Volume variance (on cost side) = Static costs – Flexible costs Volume Variance (on cost side) =? Interpret your Volume Variance results? -Management variance = Flexible costs – Actual costs Management Variance = ? Interpret your Management Variance results? f. How are the variances calculated above related?

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