Assume that the budget anticipated is 4000 patient days at a

Assume that the budget anticipated is 4,000 patient days at an average of $600 revenue per day. Further assume that expenses where budgeted at $560 per patient day.

What would the budget look like?

Now assume that only 90% of the patient days are going to be achieved with an average revenue of $600 per day. Further assume the expenses will amount to $2,200,000.

What will the projection look like?

this is the process

Compare the actual to the budgeted amount and note if the variants is a profit or a loss for both revenue and expenses.

Projection Revenues patient days 90 revenue per day Expenses 2,200,000 Profits or loss Budget Revenues Patient days revenue per day Expenses patient days expense per day Profit or loss Projection Budget Variance Revenues Expenses Profit or loss projection revenues- budget revenues =projection expenses-budget expenses projection profit-budget profit

Solution

Budget Revenues = patient days * rev per day=4000*$600 = 2400000 Expenses = patient days * expense per day = 4000*560 = 2240000 Profit = 2400000 - 2240000 = 160000 Projection Revenue = patient days * 0.90 * revenue per day = 4000*0.90*600=2160000 Expenses = 2200000 Profit/ Loss = 2160000 -2200000 = loss 40000 Variance: Revenue variance = Proj rev - bud reve = 2160000 - 2400000 = - 240000 Expenses variance = proj exp - bud exp= 2200000 - 2240000 = - 40000 Profit variance = proj profit - bud profit = - 40000 - (160000) = -200000