Kolstad Clinic Uses Patient-Visits as Its Measure of Activity

question 286

Essay

Kolstad Clinic uses patient-visits as its measure of activity.During September, the clinic budgeted for 2,200 patient-visits, but its actual level of activity was 2,600 patient-visits.The clinic uses the following revenue and cost formulas in its budgeting, where q is the number of patient-visits:

Revenue: $61.70q
Personnel expenses: $39,000 + $16.10q
Medical supplies: $1,300 + $11.90q
Occupancy expenses: $8,200 + $2.20q
Administrative expenses: $5,900 + $0.20q

The clinic reported the following actual results for September: Required:
Prepare a report showing the clinic's revenue and spending variances for September.Label each variance as favorable (F)or unfavorable (U).

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Definitions:

Equivalent Units

A concept used in cost accounting to convert partially completed goods into a number of complete units for inventory accounting purposes.

Cost Of Production Report

A document detailing the total cost incurred during the production of goods, including material, labor, and overhead expenses.

Work In Process

Inventory that is in the production process and is not yet complete; it includes raw materials, labor, and overhead costs incurred for products that are at various stages of production.

Direct Materials

Raw materials that are directly used in the production of a product and can be easily traced to the finished product.