FTE and Variance
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Section One: Calculation of Full-Time Equivalents
Personnel Budget Case Study
Question One
There are a number of items that are required in order to ensure that a budget is effectively prepared. According to lectures of this course, several items that are required include: patient acuity, patient days, length of a patient stay, number of the vacancies that are anticipated in each level, staffs’ educational needs in the in the year that follows, costs associated with staff benefits, as well as non-productive staff time that is anticipated. The background information/data about 1 West unit is as follows:
Patient Data: Average Daily Census (30); Unit Capacity (32); Average HPPD (8.8); and Total Care Hours (96,360)
Staff Data: Productive hours/employee/year (1,780); Nonproductive hours/employee/year (300); and Total Hours/employee/year (2,080)
Skill Mix: RNs (80%); LVNs (10%); and Nurse Aides (10%)
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Question Two
Calculating the number of the productive FTEs to be needed:
The initial step would be to consider the subsequent year’s workload, figuring in mind that the anticipated number of patient days will be 10,950 [obtained by multiplying average daily census (30) by 365 days].
Step 1:
Calculating Workload = HPPD x Number of patient days = 8.8 x 10,950 = 96,360
Step 2:
Calculating Productive time = Subtracting total nonproductive hours from total FTE hours; 2,080 – 300 = 1,780 hours
Step 3:
Calculating FTEs = Workload divided by productive time: 96,360/1,780 = 54.3 productive FTEs needed to staff the unit.
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Question Three
Determining the number of RNs, LVNs, as well as nurse aides that will be required to ensure that the unit is well staffed based on the assumption that there will be a 12-hours working shifts for the staff. In other words, this requires the calculation of the number of persons-shifts to be need during periods of 24-hour shifts.
Since the staffs are shared 50% for day shift and 50% for night shift in the following mix RNs (80%); LVNs (10%); and Nurse Aides (10%), the numbers are as follows:
In a 12-hour shift:
RNs = 80/100 * 54.3 = 43.44
LVNs = 10/100 * 54.3 = 5.43
Nurse aides = 10/100 * 54.3 = 5.43
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Question Four
Assigning the staff by shift and by type considering that:
Day Shift 50%
Night Shift 50%
Then,
RNs = 80/100 * 54.3 = 43.44 each shift
LVNs = 10/100 * 54.3 = 5.43 each shift
Nurse aides = 10/100 * 54.3 = 5.43 each shift
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Question Five
Coverting staff positions to full-time Equivalents or FTE positions involves converting to 24/7 as follows:
Total FTEs = 54.3 x 1.4 = 76.02 FTEs needed to staff the unit 24/7, which is equivalent to 76.02 FTE positions
This will help convert staff positions to FTE positions needed for a 24/7 shift as follows:
RNs = 80/100 * 76.02 = 60.8
LVNs = 10/100 * 76.02 = 7.6
Nurse aides = 10/100 * 76.02 = 7.6
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Section Two: Variance Analysis
Variance Analysis Case Study
- Comparing the original budget to the flexible budget reveals that, the original one had no significant unfavorable variances compared to the flexible one, which is characterized by unfavorable variances not only in terms of volume but also in terms of price and quantity. For instance, a volume variance is experienced when the actual volume is higher or lower than the budgeted volume and may be expressed in terms of FTEs or patient days. To determine volume variance, the calculation is as follows:
(Budgeted Volume – Actual Unit Volume)(Budgeted Rate) = Volume Variance
In order to get the budgeted rate, the following formula is used:
Budgeted Rate = Budget Allocation/Budgeted Volumes
Thus,
Budgeted Rate = $40 *5 * 340/340 = $200
Volume Variance = (340 – 400) (200) = – 12,000
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A comparison between the flexible budget and actual budget shows that, there are unfavorable variations in terms of price and quantity. This is because employees’ average hourly rate has increased from $40.00 to $45.00, whereas hours per care per patient have increased from 5.0 to 5.6. These two changes are indicative of an unfavorable variation. Price variance or unit cost variance determination can be calculated using the equation shown below:
(Budgeted Unit Price – Actual Unit Cost)(Actual Volume) = Unit Cost Variance
Price variance = [(40 * 5) – (45*5.6) (400)] = – $20,800
In addition, quantity variance determination can be calculated using the equation shown below:
(Budgeted Use – Actual Use)(Budgeted Unit Cost) = Quantity Variance
Quantity variance = [(340 – (400) (40 * 5)] = -12,000
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- There are several factors that led to the differences in variances including both external and internal factors. In particular, the internal factors include changes in staff efficiency which has led to an increase in the hours per care per patient from 5.0 to 5.6. Changes in technology as well as nature of surgeries may have also be other internal factors that have led to these variations.
- This is because all of these factors can collaboratively combine to delay the rate at which patients are operated eventually increasing the overall average time required to provide care to each patient in hours per visit. On the other hand, external factors that may have caused the variations include type of staff available, census changes as well as price changes, all of which can be attributed to an increase in the hours per care per patient from 5.0 to 5.6, number of visits from 340 to 400 as well as employees’ average hourly rate from $40.00 to $45.00. The unfavorable variations occurred because the above discussed factors combined to negatively impact the budgeted figures.
References
Zimmermann, P. G. (2002). Nursing management secrets, Issue 974; Volume 13 of Secrets series. Elsevier Health Sciences. p. 55.
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