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.

//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.

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.

Tennessee State University

College of Health Sciences

Department of Public Health, Health Administration, and Health Sciences

Variance Calculation-Assignment

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 = RevenueCost 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