Hourly Rate for Nursing Was Research Proposal

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Based on that comparison, we outperformed our budget because of the increased nursing efficiency we experienced. However, our main output is the number of patients served. If we evaluate the supplies cost in terms of the number of patients served, those costs actually had a 1.7% variance last year. We spent more per patient on supplies than we had expected to, but because of the way it was measured, it was not easy to make this determination. The role of managerial accounting is to provide useful information and with respect to supplies expense, this has not previously been the case. The information presented can be much more robust.

Therefore, another recommendation is to tie supplies costs to patient visits, rather than to nursing hours. This is more appropriate than the current method because efficiency of supply costs is weighed against patient visits. As such, it makes no sense to budget them on the basis of nursing hours. This structural change in our accounting will place increased focus on these costs as related to outputs. This will allow management to maintain closer control of this particular cost category when patient visits increase.

The main driver for the cost increases in the last month was the dramatic spike in nursing costs, which in turn were driven by an increase in the average wage paid per nursing hour. The most important step in containing costs is to reduce this hourly wage. The other option for Linda is to ensure management agrees that the budgeted average nursing wage should increase.

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Given the range of wages paid to nurses at the emergency room, this is another reasonable alternative.

Variance analysis can help to identify the rates at which costs are increasing compared with outputs. In the case of this emergency room, all types of variable costs increased at a greater rate than did output. As a result, greater cost controls are necessary. The budget should account for the likelihood that patient visits will go over budget, allowing management to have labour ready on hand at a rate lower than the going overtime rate.

At present, management appears to have little in the way of cost control because they do not understand the key cost drivers. They ignore the hourly wage paid to nurses in their calculations, and they have supply expenses tied to nursing usage instead of customers. By making the above-recommended changes to address these key issues, Linda will have a much stronger system of managerial accounting at her disposal. This will allow for stronger decision making, which in turn will….....

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