Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands...

Question

Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars):
Static Flexible Actual
Number of surgeries 1,200 1,3001,300
Patient revenue $2,400 $2,600 $2,535
Salary expense $1,200 $1,000 $1,365
Non salary expense $ 600$ 650$ 585
Profit $ 600$ 650$ 585
The center assumes that all revenues and costs are variable and hence tied directly to patient volume.
a. Explain how each amount in the flexible budget was calculated.
b. Determine the variance for each line of the profit and loss statement in both dollar terms and percentage terms (Each line has a total variance, a volume variance, and a price variance [for revenues] and management variances [for expenses].
c. What do the part b results tell Brandon’s managers about the surgery centers operations for the quarter?

David · Accepted Answer

A) Each amount in flexible budget is calculated on proportionate basis taking static budget as 
base. Steps involved in deriving Flexible budgets are as follows:- 
1. Divide all the revenue and expenses by the number of surgeries undertaken at the static 
level and then multiply it by the level of activity planned. 
2. Only those expenses and revenues should be divided which are directly related to the 
number of surgeries done. 
3. Fixed costs should be taken as it is because they are always incurred in totality. 
B)  
  Static Flexible Actual Variance (in $) Variance (in %)
Number of surgeries 
 $                           
1,200  
 $                           
1,

Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars): Static Flexible Actual Number of surgeries 1,200 1,3001,300 Patient revenue $2,400...

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