I am going to post the Arcadia work sheet so you will have a better understanding for my question:
Arcadia Hospital
Income Statement
YTD Dec 31, 2005
(Dollars in Millions)
Operating Revenues 2005 % of rev Budget Over/(Under)
Patient revenues 500 550
less: Allowance for doubtful accounts 13 14
equals Net patient revenues 488 536
Other Income:
Investments 75 60
Misc 5 0
Total Operating Revenue 568 100.00% 596
Operating expenses:
Wages 200 35.24% 180
Taxes & Benefits 75 13.22% 70
Temporary/Contract Labor 5 0.88% 0
Medical/surgical supplies 25 4.41% 30
Other misc supplies 5 0.88% 5
Dues/subscriptions 3 0.53% 3
Transcription expense 10 1.76% 15
Leases & rentals 50 8.81% 45
Malpractice Insurance 75 13.22% 70
Other Insurance 30 5.29% 32
Professional Fees 20 3.52% 20
Utilities 15 2.64% 10
Maintenance & Repairs 15 2.64% 10
Depreciation/Amortization 7 1.23% 7
Interest Expense 1 0.18% 1
Total Operating Expenses 536 94.45% 498
Net Income 32 5.55% 98
Given what I placed above, I do not understand how to determine the revenue variance. I just need an explanation on how one figures this out. I have read the chapter and looked at several websites, but all I need is a general understanding so I can complete this and answer the given questions.
Thank you.
I also looked at the Microsoft website, and got confused.
Do I do revenues and budgets to solve this problem. Please help me!
Please, I am not looking for the answers, just how to determine revenue variance.
To determine the revenue variance, you need to compare the actual revenue (Net patient revenues plus Other Income) to the budgeted revenue. In this case, the actual revenue is $568 million, and the budgeted revenue is $596 million.
To calculate the revenue variance, you subtract the budgeted revenue from the actual revenue:
Revenue Variance = Actual Revenue - Budgeted Revenue
= $568 million - $596 million
= -$28 million
In this case, the revenue variance is -$28 million, which means that the actual revenue is $28 million less than the budgeted revenue.
Note: A negative variance indicates that the actual revenue is less than the budgeted revenue, whereas a positive variance would indicate that the actual revenue is higher than the budgeted revenue.