Analyze the variances in the following scenario You are the

Analyze the variances in the following scenario:

You are the nursing administrator for a medical group that expects a severe outbreak of the flu this winter. You hire additional staff to treat the patients and administer shots. Your special project budget was for 1,000 hours of part-time nurses

Solution

Total Revenue for Actual Scenario:
(Number of flu shots x charge per flu shot) + (Number of flu patients x charge per patient)
=(1200 x 55) + (1400 x 70) = 66,000 + 98,000 = 164,000

Projected Revenue:
(Estimated number of flu shots that will be given x estimated charge per flu shot) + (estimated number of flu patients x estimated charge per patient)
=(400 x 50) + (1600 x 80) = 20,000 + 128,000 = 148,000

Cost due to additional staff:
(number of hours x pay per hour)
= (1000 x 40) = $40,000 (also given by problem)

Total Profit:
(Actual Revenue - Cost) = $164,000 - $40,000 = $124,000

From the perspective of revenue, the group made nearly 10% more than was originally estimated with a total profit of $124,000.
Analyze the following scenario: Jump Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. Her contention is that the pharmacy has relatively little equipment that breaks.