Volume,Risk, and Price Variance Adequate accounting principles allow for accountability,adequate projections, and budget analysis.
The special budget for the fluseason was $40,0000. The budgetprojected that 1,000 hours for additional hired part time help will fill theneed for the upcoming season. The budgetprojected that 400 flu shot would be administered while 1,600 patients would betreated. The cost per shot was expectedto be $50 while the price for treating patients were $80 per patient. The expected total revenue would be $148,000.The estimated profit would be $108,000. This was calculated by subtracting thetotal budget from the expected revenue. When analyzing this information, one mustmake sure that they leave room for possible fluctuations that may impact theanticipated numbers.
Due to thesevariances, are calculated to adequately prepare for the next year (Finkler,2013). In turn, the medical group accounted for 1,200 patientswho received the flu shot and 1,400 who received the treatment. The medicalgroup was able to collect $55 for each shot given and $70 per flu patient.
Thiswas $5 more per flue shot and $10 less per patient treated. Although the cost per patient was less, theincrease in the amount of people receiving the flu shot countered the saleprice. Finkler defined volume varianceas when the output level Is different than the budgeted expectation (Finkler,2013).
The Medical groupgenerated $164,000. The volume variance equation is the AC-BQ X BP. Theoriginal budget was $106, 400 dollars while the flex budget is $101,600dollars. The volume variance for this budget was a $4,800. The flu shots actuallyvolume rendered 1200 at a 20% budget mix.
With the budgeted price being $50 the total came to $12,000. The actual volume of flu patients was 1400with a budget mix at 80%. With a $80 budgeted price this rendered a $89,600flex budget total combining them for $101,600. Performance audits are key tool in accountingmeasures and practices. They check for the areas of waste and effectiveness.
This allows for organization to see if they are meeting their company goals andstandards (Finkler, 2013). Flu shots actual volume was 1200 with a 46% actualmix at a $50 budgeted price. This rendered $27,692. Flu patients actual volumebeing 1400 with a 54$ actual mix at a $80 budgeted cost rendered $60, 308. Thetotal performance audit was $88,00.
The mixed variance for the flex budgettotaled $101,600 and the performance audit is $88,000 giving the mix varianceof $13,600. The actual profit rendered was $124,000. The price variance equals (AP – SP) X AQ. Theprice variance is for flu shot cost is ($55-$50) x (1200) = 6,000. The pricevariance for patients treated is ($70-80) x (1400) = $-14,000. The actual flu shot revenue accumulated an actual volumeof 1200 with at 46% actual mix with a $55 actual price rendering $30,462. Flu patients’ actual volume of 1400 with a46% actual mix with a $70 equal $52,769.
The Actual revenue with the actual mixincluded is $83,231. With the performance audit at $88,000 and the actual revenuebeing $83,231, the price variance equated to $4,769. By accurately accounting thedifference between the budgeted and actual total rendered, it leaves anaccounting trail for organizations to properly track revenue and resources.This prevents waste, embezzlement and misappropriation of funds.
This is key inthe private and public sector. In the public sect, it allows for officials totrack government spending and usage. When tax payers can see clear accountingmeasures, they are able to hold elected and non-elected officials accountablefor roles in the accounting practice of government funds. In the private sector, they can tackprofitability, shareholder costs, and company viability. When clear accountingmeasure are present, shareholders can assess the risk in conductingbusiness.