Crescent Hills Retirement Home provides accommodations for up to 200 residents on its 4 acre retirement community. Crescent Hills manager Rita Avery was disappointed to see that last month’s actual results were quite different than the budget for March. The retirement home charged $2,000 per resident as planned. Expenses are categorized by the four departments that run the community home: Housekeeping, Maintenance, Dietary and Nursing. Avery is not sure what went wrong and is concerned she will need to lay off employees if this happens again in April. March’s budget and actual results are shown below. March Budget Revenue ($2,000 per resident × 180 residents) $360,000 Less expenses: Housekeeping ($65,000 plus $15 per resident) 67,700 Maintenance ($30,000 plus $23 per resident) 34,140 Dietary ($40,000 plus $180 per resident) 72,400 Nursing ($85,000 plus $300 per resident) 139,000 Operating income $46,760 March Actual Results Revenue $400,000 Less expenses: Housekeeping 97,800 Maintenance 59,200 Dietary 75,800 Nursing 144,900 Operating income $22,300 Using flexible budgeting, which one of the following statements is correct? a. All four departments have an unfavorable variance. b. Nursing is the department with the highest unfavorable variance. c. The revenue variance is favorable. d. Housekeeping and Maintenance departments have unfavorable variances.
Posted on: Sat, 25 Oct 2014 17:26:01 +0000
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