Orginal Budget Budgeted Volume Budgeted Quantity Budgeted Price

1,000 40.00 $40,000.00 F
Flexible Budget Actual Value Budgeted Quantity Budgeted Price
1,200 41.67 $50,000.00 UF

Orginal Budget/Flexible Budget Budgeted Volume Budgeted Quantity Budgeted Price
1,000 $40.00 $40,000
Actual Value Budgeted Quantity Budgeted Price
1,200 $41.67 $50,004 UF

Problem:Project Budget was for 1,000 hours of part-time nurses services at $40.00 per hour, for
a total cost of $40,000. It was expected that these nurses' woruld treat 2,000 patients. After
the flu season was over, it turned out that the total spent on part-time nurses' was $50,000.
The nurses' worked 1,200 hours and 2,600 patients were treated. Calculate the varriances.
Was the overall result favorable or unfavorable?

To calculate the variances, we need to compare the actual values with the budgeted values:

1. Flexible Budget Variance for Cost:
Flexible Budget Cost = Budgeted Quantity * Budgeted Price
Flexible Budget Cost = 1,200 * $40.00 = $48,000

Flexible Budget Variance for Cost = Actual Value - Flexible Budget Cost
Flexible Budget Variance for Cost = $50,000 - $48,000 = $2,000

2. Volume Variance for Quantity:
Volume Variance for Quantity = Actual Quantity - Budgeted Quantity
Volume Variance for Quantity = 2,600 - 2,000 = 600

3. Price Variance:
Price Variance = Flexible Budget Cost - Original Budget Cost
Price Variance = $48,000 - $40,000 = $8,000

4. Overall Variance:
Overall Variance = Actual Value - Original Budget Cost
Overall Variance = $50,000 - $40,000 = $10,000

Now, let's analyze the variances:

- The Flexible Budget Variance for Cost is $2,000, indicating that the actual cost was $2,000 higher than the expected cost at the actual quantity and price.
- The Volume Variance for Quantity is 600, indicating that more patients were treated than initially budgeted.
- The Price Variance is $8,000, indicating that the actual price per hour was higher than the budgeted price.
- The Overall Variance is $10,000, indicating that the overall result is unfavorable since the actual cost exceeded the original budget cost by $10,000.

In summary, the variances show that the result was unfavorable, with higher costs, more patients treated, and a higher price per hour than initially budgeted.

To calculate the variances and determine whether the overall result was favorable or unfavorable, we need to compare the original budget with the actual values.

1. Calculate the price variance:
Price Variance = (Actual Price - Budgeted Price) x Actual Quantity
Price Variance = ($41.67 - $40.00) x 1,200
Price Variance = $1.67 x 1,200
Price Variance = $2,004 (Unfavorable)

2. Calculate the quantity variance:
Quantity Variance = (Actual Quantity - Budgeted Quantity) x Budgeted Price
Quantity Variance = (1,200 - 1,000) x $40.00
Quantity Variance = 200 x $40.00
Quantity Variance = $8,000 (Unfavorable)

3. Calculate the total variance:
Total Variance = Price Variance + Quantity Variance
Total Variance = $2,004 + $8,000
Total Variance = $10,004 (Unfavorable)

The overall result is unfavorable because the total variance is positive, indicating that the actual cost exceeded the budgeted cost.