Prepare a three-level volume forecast as a first step in their decision-making.
HSA 525 CH. 17 AND 18
Assignment Exercise 17-1: Variance Analysis Greenview Hospitaloperated at 120% of normal capacity in twoof its departments duringthe year. It operated 120% times 20,000 normal capacity directlabor nursing hours in rou- tine services and it operated 120%times 20,000 normal capacity equipment hours in the laboratory. Thelab allocates overhead by measuring minutes and hours the equipmentis used; thus equipment hours. Assumptions: For Routine ServicesNursing: • 20,000 hours X 120% = 24,000 direct labor nursing hours.• Budgeted Overhead at 24,000 hours = $42,000 fixed plus $6,000variable = $48,000 total. • Actual Overhead at 24,000hours =$42,000fixed plus $7,000variable = $49,000 total. • AppliedOverhead for 24,000 hours at $2.35 = $56,400. For Laboratory: •20,000 hours X 120% = 24,000 equipment hours. • Budgeted Overheadat 24,000 hours = $59,600 fixed plus $11,400variable = $71,000total. • Actual Overhead at 24,000 hours = $59,600 fixed plus$11,600 variable = $71,200 total. • Applied Overhead for 24,000hours at $3.455 = $82,920. Required 1. Set up aworksheet forapplied overhead costsand volume variance with a column for RoutineServices Nursing and a second column for Laboratory. 2. Set up aworksheet for actual overhead costs and budget variance with acolumn for Routine Services Nursing and a second column forLaboratory. 3. Set up a worksheet for volume variance and budgetvariance totaling net variance with a column for Routine ServicesNursing and a second column for Laboratory. 4. Insert input datafrom Assumptions. 5. Complete computations for all threeworksheets. Assignment Exercise 17-2: Three-Level Revenue ForecastThree eye-ear-nose-and-throat physicians decide to hire anexperienced audiologist in order to add a new service line to theirpractice. *They ask the practice manager to prepare a three-level volume forecast as a first step in their decision-making.Assumptions: for the base level (most likely) revenue forecast,assume $200 per proce- dure times four procedures per day timesfive days equals 20 procedures per week times 50 weeks per yearequals 1,000 potential procedures per year. For the best caserevenue forecast, assume an increase in volume of one procedure perday average, for an annual increase of 250 procedures (5 days perweek times 50 weeks equals 250). (The best case is if the practicegains a particular managed care contract.) For the worst caserevenue forecast, assume a decrease in volume
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