Tennessee State University
College of Health Sciences
Department of Public Health, Health Administration, and Health Sciences
Variance Calculation-Assignment
Link me book
https://www.dropbox.com/s/m6270mnar7ehv4a/fundamentals_of_healthcare_finance-2ed.pdf?dl=0
Please read the chapters, as indicated in the syllabus, regarding budgets, variance, and revenue cycle. Review the PowerPoints and articles to supplement the text material.
Knowing what to look for on budgets will assist in being a better healthcare financial manager. Variance analyses help to determine the financial performance operations of an organization.
Complete the following budget variance analysis problem, compute percentages, and calculate the operating income before taxes (Chapter 1) :
Static Budget Variance Analysis for an Open Imaging Center
| Actual Amounts Incurred | Static Budget Totals | Budget Variance | Percentage (%)=Variance/actual amount X 100 | |
| Procedures Performed | 1,100 | 1,000 | ———————- | ——————- |
| Net Revenue ($400/procedure) | $440,000 | $400,000 | ? | ? |
| Expenses | ||||
| Salaries & Employee Benefits | ? | $150,000 | $20,000 [U] | ? |
| Supplies | 40,000 | 25,000 | ? | ? |
| Insurance-General | 5,000 | 5,000 | ? | ? |
| Insurance-Malpractice | 10,000 | 10,000 | ? | ? |
| Depreciation-Building | 50,000 | 50,000 | ? | ? |
| Depreciation-Equipment | 100,000 | 100,000 | ? | ? |
| Total Expenses | $375,000 | $340,000 | ? | ? |
| Operating Income | $65,000 | $60,000 | ? | ? |
Profit variance=Actual profit-Static profit
Revenue variance=Actual revenues-Static revenues
Cost variance=Static costs-Actual costs
The formula for calculating operating income is:
Operating Income = Revenue – Cost of Goods Sold (COGS), Labor, and other day-to-day expenses
{Operating income is also called EarningsBefore Interest and Taxes (EBIT)}.
Key=”F”=”Favorable” variance, while “U”= “Unfavorable” variance
Sources: Textbook and http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-income-1207
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