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HCA 240 Variance Analysis Essay
Student
HCA-240
06/09/2019
Pauline King
Variance Analysis
By ways of several means and reports, performance in a hospital setting is assessed.
From all the written reports, the variance report is the one used most consistently. It is used to
evaluate how the budgeted amount and actual amount differ from each other. Variance analysis
is of great use and is very important in the health care field. Cleverly, Song, & Cleverly (2011)
mentions that “successful use of cost variance analysis requires a sound system of standard
setting, or budgeting, and a related system of cost accounting” (p. 380). This is vital when
helping with managing the budgets, in finding the difference between actual and projected costs.
A department manager is the one who handles all budgeting and financial aspect of a variable in
a hospital. There are many responsibilities that must be upheld by them. They provide the
hospitals financial data that covers both the budget and costs. They determine if there are any
possible variances that may occur in a variance report. These responsibilities lead to the
manager being able to work towards planning and making changes to correct any issues that
arise. Cost increases for supplies and equipment, wage increase, and the increase or decrease in
patient volume, are the factors to considered in the hospital’s variance report. When this report
gets conducted, it will be given the budget results that showed if there are any imbalances of the
results.
Budget variance reports are known to be “the difference between what was planned and
what was achieved” (Cleverly, Song, & Cleverly, 2011, p. 517). According to the monthly
This study source was downloaded by 100000817936687 from CourseHero.com on 02-04-2022 07:25:43 GMT -06:00
https://www.coursehero.com/file/42567827/Variance-Analysis-Essay-CHdocx/
, 2
budget results, some go over the planned budget. Therefore, the projected goal that was planned
for the month was not achieved. Due to some surgeons and assistance working overtime because
of multiple patients with injuries and traumas, their salaries were increased which was not plan
of the budget. The use of supplies in those patients also increased the cost due to having to treat
their injuries. Variance reports are essential in providing an overview of the hospital’s
productivity that assists in monitoring the costs of labor, supplies, and equipment. The variance
reports are completed on a monthly basis and must be very detailed. When variance reports are
done correctly it allows the ability to see where the deviations came from and help to be
effective in controlling the costs. This helps to promote ways for a manager to see in how to help
the hospital increase their profits. “However, whether performance is really efficient or
inefficient will be known only when variances are analyzed in detail by their causes” (Okoh &
Uzoka, 2012). A manager is required to be able to understand how to properly interpret the
results of the variance report in order to make improvements for future budgets. “Where the
actual cost is more than standard costs, the difference is referred to as an unfavorable variance”
(Okoh & Uzoka, 2012).
As salaries increased due to over time, the monthly budget was pushed to go over due to
the unfavorable variance. As traumas continued to be brought into the hospital for care, staff
was needed to take care of the patients. If there was a massive trauma then more people would be
working overtime due to being needed. Variances can come from unexpected events, just like
the multiple traumas due to a car accident that occurred. Because the labor costs were projected
from the previous months and did not expect any big accidents to occur, the costs were up. Now,
a variable cost is a cost that changes with a change in activity (Accounting for Management,
2018). These types of costs would include the supplies, medication, and increase in number of
This study source was downloaded by 100000817936687 from CourseHero.com on 02-04-2022 07:25:43 GMT -06:00
https://www.coursehero.com/file/42567827/Variance-Analysis-Essay-CHdocx/
HCA 240 Variance Analysis Essay
Student
HCA-240
06/09/2019
Pauline King
Variance Analysis
By ways of several means and reports, performance in a hospital setting is assessed.
From all the written reports, the variance report is the one used most consistently. It is used to
evaluate how the budgeted amount and actual amount differ from each other. Variance analysis
is of great use and is very important in the health care field. Cleverly, Song, & Cleverly (2011)
mentions that “successful use of cost variance analysis requires a sound system of standard
setting, or budgeting, and a related system of cost accounting” (p. 380). This is vital when
helping with managing the budgets, in finding the difference between actual and projected costs.
A department manager is the one who handles all budgeting and financial aspect of a variable in
a hospital. There are many responsibilities that must be upheld by them. They provide the
hospitals financial data that covers both the budget and costs. They determine if there are any
possible variances that may occur in a variance report. These responsibilities lead to the
manager being able to work towards planning and making changes to correct any issues that
arise. Cost increases for supplies and equipment, wage increase, and the increase or decrease in
patient volume, are the factors to considered in the hospital’s variance report. When this report
gets conducted, it will be given the budget results that showed if there are any imbalances of the
results.
Budget variance reports are known to be “the difference between what was planned and
what was achieved” (Cleverly, Song, & Cleverly, 2011, p. 517). According to the monthly
This study source was downloaded by 100000817936687 from CourseHero.com on 02-04-2022 07:25:43 GMT -06:00
https://www.coursehero.com/file/42567827/Variance-Analysis-Essay-CHdocx/
, 2
budget results, some go over the planned budget. Therefore, the projected goal that was planned
for the month was not achieved. Due to some surgeons and assistance working overtime because
of multiple patients with injuries and traumas, their salaries were increased which was not plan
of the budget. The use of supplies in those patients also increased the cost due to having to treat
their injuries. Variance reports are essential in providing an overview of the hospital’s
productivity that assists in monitoring the costs of labor, supplies, and equipment. The variance
reports are completed on a monthly basis and must be very detailed. When variance reports are
done correctly it allows the ability to see where the deviations came from and help to be
effective in controlling the costs. This helps to promote ways for a manager to see in how to help
the hospital increase their profits. “However, whether performance is really efficient or
inefficient will be known only when variances are analyzed in detail by their causes” (Okoh &
Uzoka, 2012). A manager is required to be able to understand how to properly interpret the
results of the variance report in order to make improvements for future budgets. “Where the
actual cost is more than standard costs, the difference is referred to as an unfavorable variance”
(Okoh & Uzoka, 2012).
As salaries increased due to over time, the monthly budget was pushed to go over due to
the unfavorable variance. As traumas continued to be brought into the hospital for care, staff
was needed to take care of the patients. If there was a massive trauma then more people would be
working overtime due to being needed. Variances can come from unexpected events, just like
the multiple traumas due to a car accident that occurred. Because the labor costs were projected
from the previous months and did not expect any big accidents to occur, the costs were up. Now,
a variable cost is a cost that changes with a change in activity (Accounting for Management,
2018). These types of costs would include the supplies, medication, and increase in number of
This study source was downloaded by 100000817936687 from CourseHero.com on 02-04-2022 07:25:43 GMT -06:00
https://www.coursehero.com/file/42567827/Variance-Analysis-Essay-CHdocx/
