The spreadsheet used for variance analysis is Excelsior healthcare sheet 3. The highest variation is found in service contracts and non-medical minor equipments.
Service Contracts
Considering service contracts, the variation is of $190 with a percentage increase of 763% above the budgeted amount. This implies that company has overspent $190 on service contracts. The variance for this category could be attributed to either price or volume variance. Price variance because the price at which service contracts were negotiated would have been higher in comparison to the cost expected during budget planning. The increase of price is the result of several factors; the service level agreement for service contracts might have changes, thus increasing the cost of contract or the resources used in performing the service contract might have increased, thus pushing the cost of service contracts up. The variance could be volume variance also as healthcare could have increased the number of service contracts thus increasing the cost of service contracts. This could have due to an alteration in the policy of company.
On non-medical minor equipment, company overspent $215 with a percentage variance of 696 %. This variance could be efficiency variance or volume variance. During budgetary planning, the volume of non-medical minor equipment forecasted was far lower than the actual. These equipments might not have been used efficiently and wastage could have been the reason for the volume of the equipment required to increase.
The variance of non-medical minor equipment could be reduced with a correction plan. These equipments should be used efficiently with the recording of their frequency and details of their use. The healthcare should also be trained to use these equipments judiciously to avoid wastage. This can reduce the variance to approximately $54.
