81 Consider the following 2011 data for Newark General Hospi

8.1 Consider the following 2011 data for Newark General Hospital (in millions of dollars):

                                                  Static           Flexible          Actual

                                                  Budget        Budget          Results

Revenues                               $4.7            $4.8            $4.5

Costs                                       4.1              4.1              4.2

Profits                                      0.6              0.7              0.3

Relationships that apply to the above variances:
Profit variance	=		variance	+		variance
Revenue variance	=		variance	+		variance
Cost variance	=		variance	+		variance

Solution

Profit Variance = Actual Profit - Static Profit Profit Variance = $0.3 - $0.6 Profit Variance = $0.3 (U) Unfavorable Profit Variance means company has earned less than it planned for Revenue Variance = Actual Revenues - Static Revenues Revenue Variance = $4.5 - $4.7 Revenue Variance = $0.2 (U) Unfavorable Revenue Variance means company has sold less than it planned for Cost Variance = Static Costs - Actual Costs Cost Variance = $4.1 - $4.2 Cost Variance = $0.1 (U) Unfavorable Cost Variance means company has spent more than it planned for