Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Question
Chapter 22, Problem 4TIF
a.
To determine
Explain the budgeting methods that are being used under the new approach.
b.
To determine
Explain the reason for the new method is being superior to the former approach.
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Children's Hospital of the King's Daughters Health System in Norfolk, Virginia, introduced a new budgeting method that allowed the hospital's annual plan to be updated for changes in operating plans. For example, if the budget was based on 400 patient-days (number of patients × number of days in the hospital) and the actual count rose to 450 patient-days, the variable costs of staffing, lab work, and medication costs could be adjusted to reflect this change. The budget manager stated, “I work with hospital directors to turn data into meaningful information and effect change before the month ends.”
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What budgeting method is being used under the new approach?
What budgeting method do you think was being used under the old method?
Casper Hospital bases its budgets on patient-visits. The hospital's static planning budget for May appears below:Â
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The budgeted number of patient-visits
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5,100
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Budgeted variable costs:
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  Supplies (@ $2.70 per patient-visit)
$
13,770
  Laundry (@ $3.00 per patient-visit)
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15,300
Budgeted fixed costs:
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  Wages and salaries
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16,830
  Occupancy costs
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16,890
Total expense
$
62,790
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Required:
Prepare a flexible budget for 6,000 patient-visits per month.
The administrator of Break-a-Leg Hospital is aware of the need to keep his costs down because he just negotiated a new capitated arrangement with a large insurance company. Below are selected planned and actual expenses for the previous month.Â
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Givens:
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Budgeteda
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Actual
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A
Patient days
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27,000
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26,000
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B
Pharmacy
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$120,000
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$160,000
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Miscellaneous supplies
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$66,000
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$77,500
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D
Fixed overhead costs
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$808,000
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$880,000
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1. Prepare a flexible expense estimate for variable costs. Â
. Flexible budget estimate.Â
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BudgetedÂ
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Flexible
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Actual
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Patient days
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27,000
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26,000
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Cost per patient day
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$6.89
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$9.13
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Total cost
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$186,000
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$237,500
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2. Compute the volume variance.3. Compute the cost variance.  4. Compute the per unit cost variance. Â
5. Is the unfavorable variance caused by the volume of patients or the cost…
Chapter 22 Solutions
Financial And Managerial Accounting
Ch. 22 - Prob. 1DQCh. 22 - Briefly describe the type of human behavior...Ch. 22 - What behavioral problems are associated with...Ch. 22 - What behavioral problems are associated with...Ch. 22 - Under what circumstances would a static budget be...Ch. 22 - Prob. 6DQCh. 22 - Why should the production requirements set forth...Ch. 22 - Why should the timing of direct materials...Ch. 22 - A. Discuss the purpose of the cash budget. B. If...Ch. 22 - Give an example of how the capital expenditures...
Ch. 22 - At the beginning of the period, the Fabricating...Ch. 22 - Pasadena Candle Inc. projected sales of 800,000...Ch. 22 - Pasadena Candle Inc. budgeted production of...Ch. 22 - Pasadena Candle Inc. budgeted production of...Ch. 22 - Prepare a cost of goods sold budget for Pasadena...Ch. 22 - Prob. 6BECh. 22 - At the beginning of the school year, Craig Kovar...Ch. 22 - Digital Solutions Inc. uses flexible budgets that...Ch. 22 - Static budget versus flexible budget The...Ch. 22 - Flexible budget for Assembly Department Steelcase...Ch. 22 - Production budget Healthy Measures Inc. produces a...Ch. 22 - Sales and production budgets Sonic Inc....Ch. 22 - Professional foes earned budget for a service...Ch. 22 - Professional labor cost budget for a service...Ch. 22 - Direct materials purchases budget Tobins Frozen...Ch. 22 - Direct materials purchases budget Coca-Cola...Ch. 22 - Direct materials purchases budget Anticipated...Ch. 22 - Direct labor cost budget Ace Racket Company...Ch. 22 - Production and direct labor cost budgets Levi...Ch. 22 - Factory overhead cost budget Sweet Tooth Candy...Ch. 22 - Cost of goods sold budget Delaware Chemical...Ch. 22 - Cost of goods sold budget The controller of...Ch. 22 - Schedule of cash collections of accounts...Ch. 22 - Schedule of cash collections of accounts...Ch. 22 - Schedule of cash payments for service company...Ch. 22 - Schedule of cash payments for a service company...Ch. 22 - Capital expenditures budget On January 1, 20Y6,...Ch. 22 - Forecast sales volume and sales budget For 20Y8,...Ch. 22 - Sales, production, direct materials purchases, and...Ch. 22 - Budgeted income statement and supporting budgets...Ch. 22 - Budgeted income statement and supporting budgets...Ch. 22 - Cash budget The controller of Bridgeport...Ch. 22 - Budgeted income statement and balance sheet As a...Ch. 22 - Forecast sales volume and sales budget Sentinel...Ch. 22 - Sales, production, direct materials purchases, and...Ch. 22 - Budgeted income statement and supporting budgets...Ch. 22 - Prob. 4PBCh. 22 - Cash budget The controller of Mercury Shoes Inc....Ch. 22 - Budgeted income statement and balance sheet As a...Ch. 22 - Analyze Johnson Stores staffing budget for...Ch. 22 - Nursing staff budget Mercy Hospital staffs its...Ch. 22 - Parking lot staff budget Adventure Park is a large...Ch. 22 - Housekeeping staff budget Ambassador Suites Inc....Ch. 22 - Ethics in Action The director of marketing for...Ch. 22 - Communication The city of Milton has an annual...Ch. 22 - Prob. 4TIFCh. 22 - Static budget for a service company A hank manager...Ch. 22 - Objectives of the master budget Dominos Pizza LLC...Ch. 22 - When compared to static budgets, flexible budgets:...Ch. 22 - Hannon Retailing Company prices its products by...Ch. 22 - Ming Company has budgeted sales at 6,300 units for...Ch. 22 - Krouse Company produces two products, forged...
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