performance budgeting

1. What is performance budgeting?
2. What are the steps that make up performance budgeting?
3. When is performance budgeting appropriate?
4. What are some key performance areas for a nursing unit?
5. What is the principal way in which budgets create motivation and provide opportunities for evaluation?
6. What are several incentive approaches? Are there weaknesses to any of the approaches?
7. What is meant by “favorable” or “unfavorable” variance?
8. What are some possible causes of variances?
9. What is the essence of flexible budget variance analysis?
10. Does flexible budget variance analysis explain the cause of variances observed?
11. Why is variance analysis performed?


Flexible budget. The Chief Nurse Executive of a hospital is interested in making a quick assessment about performance for the year. The nursing department budget for the year was $10 million and actual expenses were $14 million. However, department fixed costs were budgeted at $4 million. The hospital expected to have 1,000 admissions. The hospital actually had 1,300 admissions.

a. What were the budgeted variable costs per patient?
b. What is the flexible budget for 1,300 patients?
c. How much over or under budget was the hospital, taking into account the volume of patients?  Be sure to indicate “over” or “under” as well as giving the amount in your answer

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