Price, Volume, And Risk Variances Research Paper

Length: 2 pages Sources: 2 Subject: Disease Type: Research Paper Paper: #95703619 Related Topics: Cost Accounting, Risk
Excerpt from Research Paper :

Price, Volume, And Risk Variances Analysis

The first step in the computation of revenue is to calculate volume, and price variances:

Number of patients receiving flu shots =1200

Charge per flu shot =$

Number of flu patients=1400

Charge per patient =$

Formula to calculate the projected revenue Total Revenue is as follows:

= "Number of total patients receiving flu shots * total charge per flu shot) + (Number of total flu patients * total charge per patient)"

= (1200 x 55) + (1400 x 70)

= 66,000 + 98,000

Total Revenue = $164,000.

The next step is to calculate the projected revenue as revealed as follows:

Projected Revenue:

Estimated total number of flu shots =400

Estimated total charge per flu shot =$

Estimated number of flu patients = 1,600

Estimated charge per patient = $

Formula to calculate the projected revenue is as follows:

(Estimated total number of flu shots * estimated total charge per flu shot) + (estimated total number of flu patients * estimated total charge per patient).

Projected Revenue= (400 x 50) + (1600 x 80)

Projected Revenue= (20,000 + 128,000)

Projected Revenue= $148,000.

...

In other words, the concept of variance is connected with actual and planned results. However, variance is categorized based on the outcome of the computed variance. When the actual budget results are greater than the expected results, the company records a favorable variance. However, when the expected budgeted results are better than the actual results, the company record unfavorable variance.

In essence, variance analysis is the management accounting tool to control or evaluate the performances of budgeted amount, product cost or price of goods and services. Variance analysis can also be used to evaluate the company costs and revenues. Moreover, variance analysis can be used to evaluate the difference…

Sources Used in Documents:

Reference

Larson, K.D. (2004).Fundamental Accounting Principles. Sixteenth Edition. McGraw-Hill, 2004.

Ott, E.R. & Schilling, E.G. (1990). Process Quality Control -- Troubleshooting and Interpretation of Data, 2nd Edition, McGraw-Hill.


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