[Solved] WHY DO GOOD BUDGETS GO BAD?

Assignment Prompt & Instructions

– ## wk5fincVarianceDiscussionCase.pdf

– ## wk5financeWHYDOGOODBUDGETSGOBAD.docx

– ## wk5financerubric.docx

– ## wk5financWhatIsBudgetVarianceAnalysis.docx

– wk5financeEBSCO-FullText-09_20_2025.pdf
– wk5financeNursingMadeIncrediblyEasy.docx

**## wk5fincVarianceDiscussionCase.pdf**

NURS 6211: Finance and Economics in Healthcare Delivery

Discussion: Why Do Good Budgets Go Bad?

Budgeting and Variance Analysis

Instructions:

The following are budgeted and actual revenues and expenses for a hospital:

Budgeted Actual

Revenues

Surgical Volume

2,300 2,600

Gift Shop Revenues

$18,000 $19,000

Surgery Revenues

$589,500 $852,750

Parking Revenues $17,000 $19,000

Expenses

Patients Days 26,000 25,000

Pharmacy

$119,000 $158,000

Misc. Supplies

$68,000 $795,600

Fixed Overhead Costs $832,000 $890,000

In preparation of your Discussion post submission, complete the following:

1. Determine the total variance between the planned and actual budgets for

Surgical Volume. Is the variance favorable or unfavorable?

2. Determine the total variance between the planned and actual budgets for

Patient Days. Is the variance favorable or unfavorable?

3. Consider which variances are potentially due to change in volume and which

variances are potentially due to change in rates or other factors.

**## wk5financeWHYDOGOODBUDGETSGOBAD.docx**

WHY DO GOOD BUDGETS GO BAD?


In 1948, Harry Truman became President of the United States of America, winning an election against Thomas Dewey. The result of the election was a major surprise. It was considered such a forgone conclusion that Dewey would win that a Chicago newspaper printed the headline “DEWEY DEFEATS TRUMAN” before the election was over.

The newspaper that printed this headline pursued a plan based on projected data. Once that plan was set into motion, there was no turning back. By the time it became obvious that the election would go differently than anticipated, it was too late to take corrective action.

Organizations put a great deal of effort into their budget plans. Since budgets are based on projected data, sometimes the results go differently than anticipated. The result can be budget variances.

For this Discussion, you consider what causes budget results that are different than planned results, and you explore approaches healthcare organizations use to take corrective action to ensure resources are available to maintain performance.

RESOURCES

Be sure to review the Learning Resources before completing this activity.
Click the weekly resources link to access the resources.

[**WEEKLY RESOURCES**](https://waldenu.instructure.com/courses/190151/modules/items/7927247)

TO PREPARE

· Review the information in this week’s Resources dealing with variance analysis, how it is calculated, and how it can be used in decision making, including the video Variance Analysis.

· Use the Variance Discussion Case document, provided in the Resources, to calculate budget variances for the case presented.

BY DAY 3 OF WEEK 5

**Post** a description of your insight into the budget variances in the scenario. In your opinion, what can be done, in general, to manage budget variances? Propose some best practices and/or strategies for budget control, both in general and as to how it relates to your proposed healthcare product or service solution.

## image1.jpeg

**## wk5financerubric.docx**

**NURS_6211_Week5_Discussion_Rubric**

| | | |
| — | — | — |
| NURS_6211_Week5_Discussion_Rubric |
| **Criteria** | **Ratings** | **Pts** |
| This criterion is linked to a Learning OutcomeMain Posting | **50 to >44.0 ptsExcellent** Answers all parts of the discussion question(s) expectations with reflective critical analysis and synthesis of knowledge gained from the course readings for the module and current credible sources. …Supported by at least three current, credible sources….Written clearly and concisely with no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**44 to >39.0 ptsGood** Responds to the discussion question(s) and is reflective with critical analysis and synthesis of knowledge gained from the course readings for the module. …At least 75% of post has exceptional depth and breadth. …Supported by at least three credible sources….Written clearly and concisely with one or no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**39 to >34.0 ptsFair** Responds to some of the discussion question(s). …One or two criteria are not addressed or are superficially addressed. …Is somewhat lacking reflection and critical analysis and synthesis. …Somewhat represents knowledge gained from the course readings for the module. …Post is cited with two credible sources….Written somewhat concisely; may contain more than two spelling or grammatical errors. …Contains some APA formatting errors.<br> <br>**34 to >0 ptsPoor** Does not respond to the discussion question(s) adequately….Lacks depth or superficially addresses criteria. …Lacks reflection and critical analysis and synthesis. …Does not represent knowledge gained from the course readings for the module. …Contains only one or no credible sources….Not written clearly or concisely. …Contains more than two spelling or grammatical errors. …Does not adhere to current APA manual writing rules and style. | 50 pts |
| This criterion is linked to a Learning OutcomeMain Post: Timeliness | **10 to >0.0 ptsExcellent** Posts main post by day 3<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not post by day 3 | 10 pts |
| This criterion is linked to a Learning OutcomeFirst Response | **18 to >16.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**16 to >14.0 ptsGood** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**14 to >12.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**12 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 18 pts |
| This criterion is linked to a Learning OutcomeSecond Response | **17 to >15.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings….Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**15 to >13.0 ptsGood** Response exhibits critical thinking and application to practice settings….Communication is professional and respectful to colleagues. …Responses to faculty questions are answered, if posed. …Provides clear, concise opinions and ideas that are supported by two or more credible sources. …Response is effectively written in standard, edited English.<br> <br>**13 to >11.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …. Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**11 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 17 pts |
| This criterion is linked to a Learning OutcomeParticipation | **5 to >0.0 ptsExcellent** Meets requirements for participation by posting on three different days.<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not meet requirements for participation by posting on 3 different days | 5 pts |

Total Points: 100

**## wk5financWhatIsBudgetVarianceAnalysis.docx**

**What Is Budget Variance Analysis?**

By
[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/), Contributor

**Error! Filename not specified.**

Getty

Every small business owner should have a budget that lays out the future course of the company's activities. A budget shows where the sales will come from and how the money will be spent, with the ultimate goal to produce a profit. While budgets are great for planning, they are also a valuable management tool to keep the business on track to meet its objective. The way to accomplish this goal is known as budget variance analysis.

0:07

/

0:15

Putting together a budget at the start of the year is a valuable exercise for any business. It gathers input from all the departments and gets everyone on the same page. A budget is an excellent form of communication that tells everyone where the company is going and how it intends to get there. As time passes and you start comparing actual results to the budgeted numbers, things get really interesting. This is where deviations, or variances, from the budget are identified, and you have to dig into the problem to find out why this happened.

ADVERTISEMENT

Article continues below this ad

More For You

[How to Calculate the Total Operating Costs & Breakeven Volume](https://smallbusiness.chron.com/calculate-total-operating-costs-breakeven-volume-63129.html)

**Error! Filename not specified.**

[How to Explain Variances in Monthly Financial Statements](https://smallbusiness.chron.com/explain-variances-monthly-financial-statements-31931.html)

**Error! Filename not specified.**

[How to Calculate the Cost of Sales](https://smallbusiness.chron.com/calculate-cost-sales-39871.html)

**Error! Filename not specified.**

[What Is an Operating Budget?](https://smallbusiness.chron.com/operating-budget-61475.html)

**Error! Filename not specified.**

[Price of Galvanized Steel vs. Stainless Steel](https://smallbusiness.chron.com/price-galvanized-steel-vs-stainless-steel-15433.html)

**Error! Filename not specified.**

**Calculation of Variances**

Variances are like alarm bells, and they come in two types: favorable and unfavorable.

For example, let's say the original budget for Hasty Rabbit Corporation's projected sales of blue sneakers would be $100,000 per month. After a few months into the year, the owner finds that blue sneaker sales are averaging $115,000 per month. That positive difference in sales of $15,000 per month and is a favorable variance. That's a good omen for the year.

ADVERTISEMENT

Article continues below this ad

Unfortunately, the owner also received a disturbing report about the material costs to make each pair of blue sneakers. The budget assumed that the materials cost per pair would be $8.25. However, the most recent report from manufacturing showed that material costs were actually $9.10 per pair, a difference of $0.85. That's an unfavorable variance, and definitely not a good sign.

**Types of Variances**

The cause of a variance can generally be traced to either of two types: changes in prices or quantities.

The sales department of Hasty Rabbit reported that they had kept the prices the same but were able to sell more sneakers. In this case, the favorable variance of improved sales was due to an increase in the quantity sold.

ADVERTISEMENT

Article continues below this ad

However, manufacturing might be having a problem. The owner wanted to know why the material costs had gone up by $0.85. His production supervisor told him that an increase in the price of rubber was responsible. So, in this case, the unfavorable variance was supposedly due to an increase in the cost of materials. But the owner wasn't sure this was the complete source of the problem.

**Cause of a Variance**

The real value of a budget variance analysis is the investigation and determination of the cause of a variance. Digging into the "why" may reveal important opportunities or flaws in a company's operations. Here are several scenarios to consider:

· Is the variance a long-term or short-term problem? If it's a problem expected to continue, then a more permanent solution may be needed.

· Is it possible to increase prices to make up for an unfavorable cost variance?

· Is the problem due to inefficiencies in the company's processes? In the case of the increase in manufacturing costs of blue sneakers for Hasty Rabbit, this could be the result of inefficiencies in production because of increased sales volume.

· Have conditions changed? Economic conditions can affect consumer demand, and costs of operations can increase. For example, a jump in oil prices can increase delivery costs, which cannot be passed on to the customer.

ADVERTISEMENT

Article continues below this ad

**Taking Corrective Action**

Once the owner has identified the type of variance and its cause, he can start to take corrective actions. If sales of blue sneakers are increasing, he might want to spend more on advertising to seize on this unexpected popularity.

Unfavorable variances require more serious solutions. If a process has become inefficient, managers have to find ways to improve. It might be necessary to find substitute materials that are cheaper. New machines might be needed to replace obsolete equipment. The exercise of analyzing budget variances is an ongoing management function. Over time, identifying variances, determining the causes and taking corrective actions will lead to a healthier and more profitable business.

**References**

·
[Sacramento State: Flexible Budgets and Standard Costing Variance Analysis](https://www.csus.edu/indiv/p/pforsichh/documents/flexbudgetingvmohstandardcostingvideoslides_000.pdf)

·
[Palm Beach State: Flexible Budgets and Performance Analysis](https://www.palmbeachstate.edu/forms/accounting/managerial/chapter_9.pdf)

·
[University of North Florida: Budgetary Control](https://www.unf.edu/~dtanner/dtch/dt_ch42.htm)

·
[Washington State University: Budget Analysis](https://apps.aoi.wsu.edu/onlineMedia/transcripts/acctg533_14_v(c122).pdf)

[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/)

CONTRIBUTOR

James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.

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**wk5financeNursingMadeIncrediblyEasy.docx**

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**## wk5fincVarianceDiscussionCase.pdf**

NURS 6211: Finance and Economics in Healthcare Delivery

Discussion: Why Do Good Budgets Go Bad?

Budgeting and Variance Analysis

Instructions:

The following are budgeted and actual revenues and expenses for a hospital:

Budgeted Actual

Revenues

Surgical Volume

2,300 2,600

Gift Shop Revenues

$18,000 $19,000

Surgery Revenues

$589,500 $852,750

Parking Revenues $17,000 $19,000

Expenses

Patients Days 26,000 25,000

Pharmacy

$119,000 $158,000

Misc. Supplies

$68,000 $795,600

Fixed Overhead Costs $832,000 $890,000

In preparation of your Discussion post submission, complete the following:

1. Determine the total variance between the planned and actual budgets for

Surgical Volume. Is the variance favorable or unfavorable?

2. Determine the total variance between the planned and actual budgets for

Patient Days. Is the variance favorable or unfavorable?

3. Consider which variances are potentially due to change in volume and which

variances are potentially due to change in rates or other factors.

**## wk5financeWHYDOGOODBUDGETSGOBAD.docx**

WHY DO GOOD BUDGETS GO BAD?


In 1948, Harry Truman became President of the United States of America, winning an election against Thomas Dewey. The result of the election was a major surprise. It was considered such a forgone conclusion that Dewey would win that a Chicago newspaper printed the headline “DEWEY DEFEATS TRUMAN” before the election was over.

The newspaper that printed this headline pursued a plan based on projected data. Once that plan was set into motion, there was no turning back. By the time it became obvious that the election would go differently than anticipated, it was too late to take corrective action.

Organizations put a great deal of effort into their budget plans. Since budgets are based on projected data, sometimes the results go differently than anticipated. The result can be budget variances.

For this Discussion, you consider what causes budget results that are different than planned results, and you explore approaches healthcare organizations use to take corrective action to ensure resources are available to maintain performance.

RESOURCES

Be sure to review the Learning Resources before completing this activity.
Click the weekly resources link to access the resources.

[**WEEKLY RESOURCES**](https://waldenu.instructure.com/courses/190151/modules/items/7927247)

TO PREPARE

· Review the information in this week’s Resources dealing with variance analysis, how it is calculated, and how it can be used in decision making, including the video Variance Analysis.

· Use the Variance Discussion Case document, provided in the Resources, to calculate budget variances for the case presented.

BY DAY 3 OF WEEK 5

**Post** a description of your insight into the budget variances in the scenario. In your opinion, what can be done, in general, to manage budget variances? Propose some best practices and/or strategies for budget control, both in general and as to how it relates to your proposed healthcare product or service solution.

## image1.jpeg

**## wk5financerubric.docx**

**NURS_6211_Week5_Discussion_Rubric**

| | | |
| — | — | — |
| NURS_6211_Week5_Discussion_Rubric |
| **Criteria** | **Ratings** | **Pts** |
| This criterion is linked to a Learning OutcomeMain Posting | **50 to >44.0 ptsExcellent** Answers all parts of the discussion question(s) expectations with reflective critical analysis and synthesis of knowledge gained from the course readings for the module and current credible sources. …Supported by at least three current, credible sources….Written clearly and concisely with no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**44 to >39.0 ptsGood** Responds to the discussion question(s) and is reflective with critical analysis and synthesis of knowledge gained from the course readings for the module. …At least 75% of post has exceptional depth and breadth. …Supported by at least three credible sources….Written clearly and concisely with one or no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**39 to >34.0 ptsFair** Responds to some of the discussion question(s). …One or two criteria are not addressed or are superficially addressed. …Is somewhat lacking reflection and critical analysis and synthesis. …Somewhat represents knowledge gained from the course readings for the module. …Post is cited with two credible sources….Written somewhat concisely; may contain more than two spelling or grammatical errors. …Contains some APA formatting errors.<br> <br>**34 to >0 ptsPoor** Does not respond to the discussion question(s) adequately….Lacks depth or superficially addresses criteria. …Lacks reflection and critical analysis and synthesis. …Does not represent knowledge gained from the course readings for the module. …Contains only one or no credible sources….Not written clearly or concisely. …Contains more than two spelling or grammatical errors. …Does not adhere to current APA manual writing rules and style. | 50 pts |
| This criterion is linked to a Learning OutcomeMain Post: Timeliness | **10 to >0.0 ptsExcellent** Posts main post by day 3<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not post by day 3 | 10 pts |
| This criterion is linked to a Learning OutcomeFirst Response | **18 to >16.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**16 to >14.0 ptsGood** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**14 to >12.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**12 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 18 pts |
| This criterion is linked to a Learning OutcomeSecond Response | **17 to >15.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings….Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**15 to >13.0 ptsGood** Response exhibits critical thinking and application to practice settings….Communication is professional and respectful to colleagues. …Responses to faculty questions are answered, if posed. …Provides clear, concise opinions and ideas that are supported by two or more credible sources. …Response is effectively written in standard, edited English.<br> <br>**13 to >11.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …. Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**11 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 17 pts |
| This criterion is linked to a Learning OutcomeParticipation | **5 to >0.0 ptsExcellent** Meets requirements for participation by posting on three different days.<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not meet requirements for participation by posting on 3 different days | 5 pts |

Total Points: 100

**## wk5financWhatIsBudgetVarianceAnalysis.docx**

**What Is Budget Variance Analysis?**

By
[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/), Contributor

**Error! Filename not specified.**

Getty

Every small business owner should have a budget that lays out the future course of the company's activities. A budget shows where the sales will come from and how the money will be spent, with the ultimate goal to produce a profit. While budgets are great for planning, they are also a valuable management tool to keep the business on track to meet its objective. The way to accomplish this goal is known as budget variance analysis.

0:07

/

0:15

Putting together a budget at the start of the year is a valuable exercise for any business. It gathers input from all the departments and gets everyone on the same page. A budget is an excellent form of communication that tells everyone where the company is going and how it intends to get there. As time passes and you start comparing actual results to the budgeted numbers, things get really interesting. This is where deviations, or variances, from the budget are identified, and you have to dig into the problem to find out why this happened.

ADVERTISEMENT

Article continues below this ad

More For You

[How to Calculate the Total Operating Costs & Breakeven Volume](https://smallbusiness.chron.com/calculate-total-operating-costs-breakeven-volume-63129.html)

**Error! Filename not specified.**

[How to Explain Variances in Monthly Financial Statements](https://smallbusiness.chron.com/explain-variances-monthly-financial-statements-31931.html)

**Error! Filename not specified.**

[How to Calculate the Cost of Sales](https://smallbusiness.chron.com/calculate-cost-sales-39871.html)

**Error! Filename not specified.**

[What Is an Operating Budget?](https://smallbusiness.chron.com/operating-budget-61475.html)

**Error! Filename not specified.**

[Price of Galvanized Steel vs. Stainless Steel](https://smallbusiness.chron.com/price-galvanized-steel-vs-stainless-steel-15433.html)

**Error! Filename not specified.**

**Calculation of Variances**

Variances are like alarm bells, and they come in two types: favorable and unfavorable.

For example, let's say the original budget for Hasty Rabbit Corporation's projected sales of blue sneakers would be $100,000 per month. After a few months into the year, the owner finds that blue sneaker sales are averaging $115,000 per month. That positive difference in sales of $15,000 per month and is a favorable variance. That's a good omen for the year.

ADVERTISEMENT

Article continues below this ad

Unfortunately, the owner also received a disturbing report about the material costs to make each pair of blue sneakers. The budget assumed that the materials cost per pair would be $8.25. However, the most recent report from manufacturing showed that material costs were actually $9.10 per pair, a difference of $0.85. That's an unfavorable variance, and definitely not a good sign.

**Types of Variances**

The cause of a variance can generally be traced to either of two types: changes in prices or quantities.

The sales department of Hasty Rabbit reported that they had kept the prices the same but were able to sell more sneakers. In this case, the favorable variance of improved sales was due to an increase in the quantity sold.

ADVERTISEMENT

Article continues below this ad

However, manufacturing might be having a problem. The owner wanted to know why the material costs had gone up by $0.85. His production supervisor told him that an increase in the price of rubber was responsible. So, in this case, the unfavorable variance was supposedly due to an increase in the cost of materials. But the owner wasn't sure this was the complete source of the problem.

**Cause of a Variance**

The real value of a budget variance analysis is the investigation and determination of the cause of a variance. Digging into the "why" may reveal important opportunities or flaws in a company's operations. Here are several scenarios to consider:

· Is the variance a long-term or short-term problem? If it's a problem expected to continue, then a more permanent solution may be needed.

· Is it possible to increase prices to make up for an unfavorable cost variance?

· Is the problem due to inefficiencies in the company's processes? In the case of the increase in manufacturing costs of blue sneakers for Hasty Rabbit, this could be the result of inefficiencies in production because of increased sales volume.

· Have conditions changed? Economic conditions can affect consumer demand, and costs of operations can increase. For example, a jump in oil prices can increase delivery costs, which cannot be passed on to the customer.

ADVERTISEMENT

Article continues below this ad

**Taking Corrective Action**

Once the owner has identified the type of variance and its cause, he can start to take corrective actions. If sales of blue sneakers are increasing, he might want to spend more on advertising to seize on this unexpected popularity.

Unfavorable variances require more serious solutions. If a process has become inefficient, managers have to find ways to improve. It might be necessary to find substitute materials that are cheaper. New machines might be needed to replace obsolete equipment. The exercise of analyzing budget variances is an ongoing management function. Over time, identifying variances, determining the causes and taking corrective actions will lead to a healthier and more profitable business.

**References**

·
[Sacramento State: Flexible Budgets and Standard Costing Variance Analysis](https://www.csus.edu/indiv/p/pforsichh/documents/flexbudgetingvmohstandardcostingvideoslides_000.pdf)

·
[Palm Beach State: Flexible Budgets and Performance Analysis](https://www.palmbeachstate.edu/forms/accounting/managerial/chapter_9.pdf)

·
[University of North Florida: Budgetary Control](https://www.unf.edu/~dtanner/dtch/dt_ch42.htm)

·
[Washington State University: Budget Analysis](https://apps.aoi.wsu.edu/onlineMedia/transcripts/acctg533_14_v(c122).pdf)

[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/)

CONTRIBUTOR

James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.

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**wk5financeEBSCO-FullText-09_20_2025.pdf**

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**## wk5fincVarianceDiscussionCase.pdf**

NURS 6211: Finance and Economics in Healthcare Delivery

Discussion: Why Do Good Budgets Go Bad?

Budgeting and Variance Analysis

Instructions:

The following are budgeted and actual revenues and expenses for a hospital:

Budgeted Actual

Revenues

Surgical Volume

2,300 2,600

Gift Shop Revenues

$18,000 $19,000

Surgery Revenues

$589,500 $852,750

Parking Revenues $17,000 $19,000

Expenses

Patients Days 26,000 25,000

Pharmacy

$119,000 $158,000

Misc. Supplies

$68,000 $795,600

Fixed Overhead Costs $832,000 $890,000

In preparation of your Discussion post submission, complete the following:

1. Determine the total variance between the planned and actual budgets for

Surgical Volume. Is the variance favorable or unfavorable?

2. Determine the total variance between the planned and actual budgets for

Patient Days. Is the variance favorable or unfavorable?

3. Consider which variances are potentially due to change in volume and which

variances are potentially due to change in rates or other factors.

**## wk5financeWHYDOGOODBUDGETSGOBAD.docx**

WHY DO GOOD BUDGETS GO BAD?


In 1948, Harry Truman became President of the United States of America, winning an election against Thomas Dewey. The result of the election was a major surprise. It was considered such a forgone conclusion that Dewey would win that a Chicago newspaper printed the headline “DEWEY DEFEATS TRUMAN” before the election was over.

The newspaper that printed this headline pursued a plan based on projected data. Once that plan was set into motion, there was no turning back. By the time it became obvious that the election would go differently than anticipated, it was too late to take corrective action.

Organizations put a great deal of effort into their budget plans. Since budgets are based on projected data, sometimes the results go differently than anticipated. The result can be budget variances.

For this Discussion, you consider what causes budget results that are different than planned results, and you explore approaches healthcare organizations use to take corrective action to ensure resources are available to maintain performance.

RESOURCES

Be sure to review the Learning Resources before completing this activity.
Click the weekly resources link to access the resources.

[**WEEKLY RESOURCES**](https://waldenu.instructure.com/courses/190151/modules/items/7927247)

TO PREPARE

· Review the information in this week’s Resources dealing with variance analysis, how it is calculated, and how it can be used in decision making, including the video Variance Analysis.

· Use the Variance Discussion Case document, provided in the Resources, to calculate budget variances for the case presented.

BY DAY 3 OF WEEK 5

**Post** a description of your insight into the budget variances in the scenario. In your opinion, what can be done, in general, to manage budget variances? Propose some best practices and/or strategies for budget control, both in general and as to how it relates to your proposed healthcare product or service solution.

## image1.jpeg

**## wk5financerubric.docx**

**NURS_6211_Week5_Discussion_Rubric**

| | | |
| — | — | — |
| NURS_6211_Week5_Discussion_Rubric |
| **Criteria** | **Ratings** | **Pts** |
| This criterion is linked to a Learning OutcomeMain Posting | **50 to >44.0 ptsExcellent** Answers all parts of the discussion question(s) expectations with reflective critical analysis and synthesis of knowledge gained from the course readings for the module and current credible sources. …Supported by at least three current, credible sources….Written clearly and concisely with no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**44 to >39.0 ptsGood** Responds to the discussion question(s) and is reflective with critical analysis and synthesis of knowledge gained from the course readings for the module. …At least 75% of post has exceptional depth and breadth. …Supported by at least three credible sources….Written clearly and concisely with one or no grammatical or spelling errors and fully adheres to current APA manual writing rules and style.<br> <br>**39 to >34.0 ptsFair** Responds to some of the discussion question(s). …One or two criteria are not addressed or are superficially addressed. …Is somewhat lacking reflection and critical analysis and synthesis. …Somewhat represents knowledge gained from the course readings for the module. …Post is cited with two credible sources….Written somewhat concisely; may contain more than two spelling or grammatical errors. …Contains some APA formatting errors.<br> <br>**34 to >0 ptsPoor** Does not respond to the discussion question(s) adequately….Lacks depth or superficially addresses criteria. …Lacks reflection and critical analysis and synthesis. …Does not represent knowledge gained from the course readings for the module. …Contains only one or no credible sources….Not written clearly or concisely. …Contains more than two spelling or grammatical errors. …Does not adhere to current APA manual writing rules and style. | 50 pts |
| This criterion is linked to a Learning OutcomeMain Post: Timeliness | **10 to >0.0 ptsExcellent** Posts main post by day 3<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not post by day 3 | 10 pts |
| This criterion is linked to a Learning OutcomeFirst Response | **18 to >16.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**16 to >14.0 ptsGood** Response exhibits synthesis, critical thinking, and application to practice settings. …Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**14 to >12.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**12 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 18 pts |
| This criterion is linked to a Learning OutcomeSecond Response | **17 to >15.0 ptsExcellent** Response exhibits synthesis, critical thinking, and application to practice settings….Responds fully to questions posed by faculty. …Provides clear, concise opinions and ideas that are supported by at least two scholarly sources. …Demonstrates synthesis and understanding of learning objectives….Communication is professional and respectful to colleagues. ….Responses to faculty questions are fully answered, if posed. …Response is effectively written in standard, edited English.<br> <br>**15 to >13.0 ptsGood** Response exhibits critical thinking and application to practice settings….Communication is professional and respectful to colleagues. …Responses to faculty questions are answered, if posed. …Provides clear, concise opinions and ideas that are supported by two or more credible sources. …Response is effectively written in standard, edited English.<br> <br>**13 to >11.0 ptsFair** Response is on topic and may have some depth….Responses posted in the discussion may lack effective professional communication. …Responses to faculty questions are somewhat answered, if posed. …. Response may lack clear, concise opinions and ideas, and a few or no credible sources are cited.<br> <br>**11 to >0 ptsPoor** Response may not be on topic and lacks depth….Responses posted in the discussion lack effective professional communication. …Responses to faculty questions are missing. …No credible sources are cited. | 17 pts |
| This criterion is linked to a Learning OutcomeParticipation | **5 to >0.0 ptsExcellent** Meets requirements for participation by posting on three different days.<br> <br>**0 ptsFair**<br>**0 ptsGood**<br>**0 ptsPoor** Does not meet requirements for participation by posting on 3 different days | 5 pts |

Total Points: 100

**## wk5financWhatIsBudgetVarianceAnalysis.docx**

**What Is Budget Variance Analysis?**

By
[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/), Contributor

**Error! Filename not specified.**

Getty

Every small business owner should have a budget that lays out the future course of the company's activities. A budget shows where the sales will come from and how the money will be spent, with the ultimate goal to produce a profit. While budgets are great for planning, they are also a valuable management tool to keep the business on track to meet its objective. The way to accomplish this goal is known as budget variance analysis.

0:07

/

0:15

Putting together a budget at the start of the year is a valuable exercise for any business. It gathers input from all the departments and gets everyone on the same page. A budget is an excellent form of communication that tells everyone where the company is going and how it intends to get there. As time passes and you start comparing actual results to the budgeted numbers, things get really interesting. This is where deviations, or variances, from the budget are identified, and you have to dig into the problem to find out why this happened.

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**Calculation of Variances**

Variances are like alarm bells, and they come in two types: favorable and unfavorable.

For example, let's say the original budget for Hasty Rabbit Corporation's projected sales of blue sneakers would be $100,000 per month. After a few months into the year, the owner finds that blue sneaker sales are averaging $115,000 per month. That positive difference in sales of $15,000 per month and is a favorable variance. That's a good omen for the year.

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Unfortunately, the owner also received a disturbing report about the material costs to make each pair of blue sneakers. The budget assumed that the materials cost per pair would be $8.25. However, the most recent report from manufacturing showed that material costs were actually $9.10 per pair, a difference of $0.85. That's an unfavorable variance, and definitely not a good sign.

**Types of Variances**

The cause of a variance can generally be traced to either of two types: changes in prices or quantities.

The sales department of Hasty Rabbit reported that they had kept the prices the same but were able to sell more sneakers. In this case, the favorable variance of improved sales was due to an increase in the quantity sold.

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However, manufacturing might be having a problem. The owner wanted to know why the material costs had gone up by $0.85. His production supervisor told him that an increase in the price of rubber was responsible. So, in this case, the unfavorable variance was supposedly due to an increase in the cost of materials. But the owner wasn't sure this was the complete source of the problem.

**Cause of a Variance**

The real value of a budget variance analysis is the investigation and determination of the cause of a variance. Digging into the "why" may reveal important opportunities or flaws in a company's operations. Here are several scenarios to consider:

· Is the variance a long-term or short-term problem? If it's a problem expected to continue, then a more permanent solution may be needed.

· Is it possible to increase prices to make up for an unfavorable cost variance?

· Is the problem due to inefficiencies in the company's processes? In the case of the increase in manufacturing costs of blue sneakers for Hasty Rabbit, this could be the result of inefficiencies in production because of increased sales volume.

· Have conditions changed? Economic conditions can affect consumer demand, and costs of operations can increase. For example, a jump in oil prices can increase delivery costs, which cannot be passed on to the customer.

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**Taking Corrective Action**

Once the owner has identified the type of variance and its cause, he can start to take corrective actions. If sales of blue sneakers are increasing, he might want to spend more on advertising to seize on this unexpected popularity.

Unfavorable variances require more serious solutions. If a process has become inefficient, managers have to find ways to improve. It might be necessary to find substitute materials that are cheaper. New machines might be needed to replace obsolete equipment. The exercise of analyzing budget variances is an ongoing management function. Over time, identifying variances, determining the causes and taking corrective actions will lead to a healthier and more profitable business.

**References**

·
[Sacramento State: Flexible Budgets and Standard Costing Variance Analysis](https://www.csus.edu/indiv/p/pforsichh/documents/flexbudgetingvmohstandardcostingvideoslides_000.pdf)

·
[Palm Beach State: Flexible Budgets and Performance Analysis](https://www.palmbeachstate.edu/forms/accounting/managerial/chapter_9.pdf)

·
[University of North Florida: Budgetary Control](https://www.unf.edu/~dtanner/dtch/dt_ch42.htm)

·
[Washington State University: Budget Analysis](https://apps.aoi.wsu.edu/onlineMedia/transcripts/acctg533_14_v(c122).pdf)

[Jim Woodruff](https://smallbusiness.chron.com/author/jim-woodruff/)

CONTRIBUTOR

James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.

**Around The Web**


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**LeafFilter Partner**

**Neurologist: 97% of People With Neuropathy Don't Know This Crucial Thing**

**FootRenew**

**Here's What New Gutter Guards Should Cost You in 2025**

**LeafFilter Partner**

**Dementia Has Been Linked to These Common Foods. Are You Eating Them?**

**BrainDefender**

**You Can See People Wearing This 250th Anniversary Hat Everywhere**

**Glosritystore**

**Amazon's Hottest Selling Hearing Aid is Back on Sale for $99**

**Oricle Hearing**

**Brain Switch That Ends Tinnitus Naturally-Ignored by Medicine**

**Brain Defender**

**Anyone Considering Investing in Gold Should See This**

**Protect My Savings**

Return To Top

About

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