Written assignmentHealthcare finance

FINANCE AND ECONOMICS IN HEALTH CARE DELIVERY DQ

The brief calls the explanation the critical piece, and it is right. A variance number tells you something moved; only decomposition tells you what to do about it.

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Last reviewed · August 23, 2026

Written by

Maren Caldwell

MSN, RN, CNE

Medical-surgical nursing, pharmacology and NCLEX preparation

Reviewed by

Dr. Tessa Redmond

DNP, RN, CNE

Evidence-based practice and clinical education

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A variance is a question, not a finding

The brief keeps returning to the word why, and it is worth taking literally. A variance is the difference between what was budgeted and what happened, and by itself it tells you almost nothing actionable. The work is decomposition, because a single unfavourable expense variance on a nursing unit can arise from at least three independent causes that call for opposite responses. A volume variance means more patients arrived than planned, in which case spending more was correct and the budget was wrong. A rate or price variance means each unit of input cost more than planned, which on a nursing unit usually means agency or overtime hours substituting for base staff. An efficiency or usage variance means more input was consumed per unit of output, which is the one that points at process rather than at the market. Say which component each figure belongs to as you calculate it, since the decomposition is the deliverable.

Separate them explicitly, because the management response differs completely. A volume variance is addressed by reforecasting; a rate variance by recruitment, retention or contract negotiation; an efficiency variance by examining how the work is done. Flexible budgeting is the technique that makes this possible and is worth naming, since it restates the budget at the volume actually achieved and so removes volume from the comparison, leaving rate and efficiency visible. Two further points raise a submission. Favourable variances deserve investigation too, since underspending may mean deferred maintenance, unfilled posts or care not delivered. And materiality matters: reporting every variance equally buries the one that counts, so state a threshold below which a variance is noise and above which it is investigated. A deferred repair and a vacancy both look like savings in month one and neither is one by month twelve, which is why the favourable column deserves the same scrutiny.

Likely learning objectives

Decompose a variance into volume, rate and efficiency components.
Match a management response to each variance type. State the threshold explicitly, because an analysis that reports everything reports nothing.
Use flexible budgeting to remove volume from the comparison.
Apply a materiality threshold and investigate favourable variances.

Assignment instructions

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Having a budget is critical for the financial stability of an organization. Keeping track of how well the organization is actually adhering to the budget, and subsequent identification of why the budget numbers are being missed is equally important. Without this critical “why” piece, it is difficult to make the necessary adjustments to the budget or to organizational behavior that might be promoting overspending. A good budget is built with thoughtful consideration of future costs and revenue. Though your budget is formulated with expected figures in mind, the actual resulting values may vary considerably. This variance–from projected to actual–can be a pleasant surprise or a fiscal nightmare and can make financial decision making difficult. Fortunately, variance analysis can enable management to determine why variance occurred and what can be done to mitigate its effects. For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials. To prepare: Review the information in this week’s Learning Resources dealing with variance analysis, how it is calculated, and how it can be used in decision making. View the video Week 8 Application Assignment Tutorial: Variance Analysis, provided in this week’s Learning Resources. Use the Week 8 Application Assignment Template, provided in this week’s Learning Resources, to complete this assignment. Carefully examine the information in each of the scenarios and provide the necessary calculations. Using this information will help you answer the questions. By Day 7 Note: For those Assignments in this course that require you to perform calculations you must: Use the Excel spreadsheet template for the Week 8 assignment Show all your calculations and formulas in the spreadsheet. Answer any questions included with the problems (as text in the Excel spreadsheet). A title and reference page are NOT needed in this assignment. Put your name and assignment at the top of the Excel spreadsheet. Use the Week 8 Application Assignment Template for the Week 8 assignment Salary Variance Scenario For this Assignment run a variance analysis. Based on the information you obtain: assess the results of the analysis, suggest potential causes of the budget variances and an explanation for addressing the situation. Using the following performance data calculate the volume adjusted labor rate variance and volume adjusted efficiency variance. Your Variable Expense Factor is 40% and your Volume Change Factor is 50%. Note: Submit the Excel spreadsheet containing your Salary Variance Scenario calculations to the Assignment submission link.

Course-wide instructions that accompany this question

You must proofread your paper. But do not strictly rely on your computer’s spell-checker and grammar-checker; failure to do so indicates a lack of effort on your part and you can expect your grade to suffer accordingly. Papers with numerous misspelled words and grammatical mistakes will be penalized. Read over your paper – in silence and then aloud – before handing it in and make corrections as necessary. Often it is advantageous to have a friend proofread your paper for obvious errors. Handwritten corrections are preferable to uncorrected mistakes. Use a standard 10 to 12 point (10 to 12 characters per inch) typeface. Smaller or compressed type and papers with small margins or single-spacing are hard to read. It is better to let your essay run over the recommended number of pages than to try to compress it into fewer pages. Likewise, large type, large margins, large indentations, triple-spacing, increased leading (space between lines), increased kerning (space between letters), and any other such attempts at “padding” to increase the length of a paper are unacceptable, wasteful of trees, and will not fool your professor. The paper must be neatly formatted, double-spaced with a one-inch margin on the top, bottom, and sides of each page. When submitting hard copy, be sure to use white paper and print out using dark ink. If it is hard to read your essay, it will also be hard to follow your argument

What the variance analysis assignment requires

01A variance analysis based on the scenario provided in the learning resources.
02Calculation of the variances using the method demonstrated.
03An explanation of why the variances occurred.
04An account of what can be done to mitigate their effects.
05The analysis presented in the format the assignment requires.