Cayouette Clinic Uses Patient-Visits as Its Measure of Activity

question 237

Essay

Cayouette Clinic uses patient-visits as its measure of activity. During February, the clinic budgeted for 2,400 patient-visits, but its actual level of activity was 2,700 patient-visits. The clinic uses the following revenue and cost formulas in its budgeting, where q is the number of patient-visits:
Revenue: $53.80q
Personnel expenses: $32,000 + $16.60q
Medical supplies: $700 + $8.80q
Occupancy expenses: $10,400 + $1.90q
Administrative expenses: $5,500 + $0.20q
The clinic reported the following actual results for February: Required:
Prepare the clinic's flexible budget performance report for February. Label each variance as favorable (F) or unfavorable (U).

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Definitions:

Budget Line

A graphical representation showing the combination of goods a consumer can purchase and consume within their income level at specific prices.

Equilibrium

A state where market supply and demand balance each other, and as a result, prices become stable.

Consumer's Money Income

The total amount of income a consumer has available to spend and save after taxes have been deducted.

Budget Line

A graphical representation of all possible combinations of two goods which can be purchased with a given budget at specific prices.