acc-Table 17-18: Actual Original Budget Variance

Table 17-18:

Actual Original Budget Variance

Procedures $100,000 120,000 20,000 unfavorable)

Variable costs 1,200,000 1,320,000 120,000 (favorable)

Fixed costs 600,000 600,000

Total costs 1,800,000 1,920,000 120,000 (favorable)

Average cost per unit $18.00 $16.00

Variable cost per unit $12.00 $11.00

Fixed cost per unit $6.00 5.00

The service unit, or output, for this department is the number of procedures performed. A static budget was prepared at the beginning of the year. Examine that budget in relation to actual experience. The relevant data are included in Table 17-18 in your course text. The department manager is pleased because the department hasa favorable $120,000 cost variance. Evaluate the effectiveness claims of the manager using the budgetary variance mode described in Chapter 17. What is your analysis of the department manager’s performance? Explain your reasoning.