Variance Analysis

1253 words 6 pages
Leslie M. Rogakis
HCA 240-0500
Professor Tirizia York

Variance Analysis A variable department manager has many factors to consider when interpreting and analyzing a variance report. Variances can be attributed to factors such as increased or decreased volume, wage increases, cost increases for equipment and cost increases for supplies. Variance reports are a tool that can be utilized to analyze how well a company is doing with meeting current budgetary goals as well as a means for forecasting information for future budgets. In preparing a variance analysis report to be presented to the vice president, the information needs to be simple enough to understand easily, but detailed enough for the information to be useful to
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If wages for the prior month were within budget and the current month’s wages are over the budgeted amount, analyzing the differences between the two months will provide the information needed in order to complete a report that will explain why the difference occurred. Wages can vary due to additional overtime hours that were necessary to cover sick or vacation days taken by other employees, a staff shortage or a higher than expected volume of patients. Further breakdown of the wages category is necessary in order to determine the causing factor. (Cleverly, Song, & Cleverly, 2011, Pg. 386) Supply costs can vary for many reasons as well. Often times, if supply costs are less than expected in a given month, it can be due to several factors such as an over-purchase of supplies the month before, a less than expected volume of patients or possibly a supply that was purchased for less than the normal price. It is very important to determine the cause of an under budget supply cost because if it appears that the department doesn’t need to have a certain budget for supplies, then the budget could be reduced. This is true with all aspects of the departmental budget and clear and concise reasoning for each variance must be presented in terms that are easily understood. (Dove & Forthman, 1995) One the variance report has been analyzed by the department manager, there is a better understanding of the actual performance of the department and this can also be presented within the


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