Problem: Chelsea Clinic projected the following budget information for 2020:
Total FFS Visit Volume 90,000 visit
Payer Mix:
Blue Cross 40% (36,000)
Highmark 60% (54,000)
Reimbursement Rates:
Blue Cross $25 per visit
Highmark $20 per visit
Variable Costs
Resource Inputs:
Labor 48,000 total hours
Supplies 1000,000 total hours
Resource Input Prices:
Labor $25.00 per hour
Supplies $1.50 per unit
Fixed Costs (overhead, plant, and equipment) $500,000
a. Construct Chelsea Clinic's operating budget for 2020.
b. Discuss how each key budget assumption might result in a budget variance, and name the variance that would be used to examine results associated with each assumption.