Six months of salary variance on an adult medicine unit, $226,477, split into census, orientation and premium labor, each traced to a staffing decision, for NU513 Unit 2. Searches like "nu 513 unit 2 assignment example", "nu513 unit 2 sample" and "nu513 unit 2 example" land here.
One Overrun, Four Decisions and a Census: A Salary Variance Analysis for a Composite Medicine Unit
[Student Name]
Purdue University Global
NU513: Health Care Finance, Economics, and Strategic Planning
Unit 2 Assignment
[Instructor Name]
[Date]
All figures are composite and bracketed where they are the student's own; the method follows standard flexible budget variance analysis.
Summary for the Chief Nursing Officer
Salary expense for the six months ending [December] was $2,068,120 against a static budget of $1,841,643, an overrun of $226,477. About $45,832 reflects more patient days than budgeted, work the hospital was paid for. About $49,979 reflects hours above the flexed budget, almost all of it orientation for four new graduates hired in September. The largest part, $130,667, reflects a higher average hourly rate, driven by traveler contracts and overtime after two resignations in June. I recommend no action on volume, a planned end to the orientation variance by [March], and a staffing business case to reduce premium labor, which I will bring in [Unit 7].
The Variance Table
1. Patient days: budgeted 5,505; actual 5,642.
2. Worked hours per patient day: target 8.6.
3. Budgeted hours: 5,505 times 8.6 equals 47,343. Budgeted average rate: $38.90 an hour.
4. Static budget: 47,343 hours times $38.90 equals $1,841,643.
5. Flexed budget, at actual census: 5,642 times 8.6 equals 48,521 hours, times $38.90 equals $1,887,475.
6. Actual hours: 49,806. Actual spending: $2,068,120, an average of about $41.52 an hour.
7. Volume variance: flexed minus static, $45,832, unfavorable in dollars but explained by workload.
8. Efficiency, or quantity, variance: 1,285 actual hours above the flexed hours, times the budgeted rate of $38.90, equals $49,979.
9. Rate, or price, variance: actual spending minus flexed budget minus efficiency variance, $130,667.
10. Total: $45,832 plus $49,979 plus $130,667 equals $226,477.
Volume: More Work, Not Overspending
Volume comes first because it is the easiest to misread. The unit cared for 137 more patient days than budgeted, mostly from a surge of respiratory admissions in [November] that the emergency department placed on medicine. A flexible budget adjusts expected costs to the volume actually delivered (Finkler et al., 2013). At the unit's target of 8.6 hours per patient day, those extra days required 1,178 more hours, and $45,832 is what those hours cost at the budgeted rate. Each of those days also produced revenue for the hospital. The volume variance is the unit doing more of the work it exists to do, and it should be reported as such rather than as a failure to control cost.
Efficiency: Orientation for Four New Graduates
After flexing, the unit used 1,285 hours more than the target would allow. Of those, 1,240 were orientation hours for four new graduate nurses hired in September, who worked alongside preceptors for twelve weeks as supernumerary staff before carrying their own assignments. The remaining 45 hours are within normal variation.
The decision behind this variance was deliberate. Faced with two vacancies in June and a thin applicant pool, the unit chose to hire new graduates rather than wait for experienced nurses. New graduates cost less per hour once oriented, but they require a long orientation that appears as extra hours now. The unit traded orientation cost in this period for lower wage costs in later ones, and for filled positions sooner. The efficiency variance should end when the new graduates' orientation closes in [March].
Rate: Premium Labor
The largest variance is rate: the unit paid about $41.52 an hour on average against a budgeted $38.90. Two causes account for nearly all of it.
Traveler contracts. After two experienced nurses resigned in June, the unit brought in two traveling nurses from July, [2,496] hours at a bracketed contract rate of $96 an hour. Against the core registered nurse base rate of [$45.60], that is a premium of about [$125,800].
Overtime. The unit used [3,960] overtime hours during the six months, mostly by registered nurses. The premium portion, half the base rate on each hour, adds about [$90,300].
Those two premiums total about [$216,100], more than the rate variance itself. They are partly offset, by about [$85,400], by two effects that pull the average rate down: the four new graduates are paid [$36.80] an hour, below the experienced nurses they replaced, and technicians made up a slightly larger share of worked hours than budgeted.
Together these explain most of the rate variance. Losing experienced nurses has costs well beyond these premiums, in vacancy, recruitment, orientation and lost productivity (Jones, 2005), so the June resignations are the root of the rate variance as well as the efficiency variance. The decisions that followed were made in June and July: to cover vacancies with contract labor rather than close beds, and to accept overtime while new graduates oriented. Both were reasonable responses to vacancies, but both are expensive to sustain.
What Is Controllable
The variances differ in how much the unit can control. Volume is not controllable at the unit level; census is set by admissions and bed placement. Efficiency is partly controllable, through the length and structure of orientation. Rate is the most controllable over time, through reducing vacancies and therefore the need for premium labor, but not in the short run. That is why the recommendation for rate is a business case for core positions rather than a spending freeze.
What Finance Might Ask Next
Three questions are likely, and the analysis should answer them before they are asked. First, why not close beds instead of paying travelers? Closing four beds for six months would have cost the hospital roughly [730] patient days of revenue and diverted admissions to the emergency department's hallway, which the hospital's own policy discourages. Second, why not hire experienced nurses rather than new graduates? The unit posted two experienced positions for [eleven] weeks and received [three] qualified applicants, two of whom took other offers. Third, will this repeat next half? Volume will depend on the respiratory season; orientation will end; premium labor will continue until the vacancies are filled or the business case is approved. Only the third is within the unit's power to change, and only with a decision from above the unit.
Recommendations
1. Report the volume variance to finance as workload, with the patient-day figures, and ask that the unit be evaluated against its flexed budget.
2. Close the orientation variance by [March], as planned, and track the new graduates' first-year retention, since losing any of them would repeat the cost. Published turnover cost estimates can be brought to current dollars with a simple inflation adjustment (Jones, 2008), which gives finance a figure for what each retained nurse is worth.
3. Prepare a business case comparing the cost of premium labor with the cost of adding core registered nurse positions, since the rate variance will continue as long as the vacancies do.
References
Finkler, S. A., Jones, C. B., & Kovner, C. T. (2013). Financial management for nurse managers and executives (4th ed.). Elsevier.
Jones, C. B. (2005). The costs of nurse turnover, part 2: Application of the Nursing Turnover Cost Calculation Methodology. The Journal of Nursing Administration, 35(1), 41-49. https://doi.org/10.1097/00005110-200501000-00014
Jones, C. B. (2008). Revisiting nurse turnover costs: Adjusting for inflation. The Journal of Nursing Administration, 38(1), 11-18. https://doi.org/10.1097/01.NNA.0000295636.03216.6f
How this NU513 Unit 2 example is structured
Each variance is answered with a decision and the date it was made, which is what the course rewards. Volume is presented first and defended, because more patient days are revenue for the hospital and workload for the unit, not overspending. Orientation comes next. Four new graduates hired in September explain nearly all the hours above the flexed budget, and the analysis names the choice behind them: new graduates rather than experienced hires, trading orientation cost now for a lower wage later. Premium labor, the biggest component, gets the longest explanation. Two resignations in June led to traveler contracts starting in July, and overtime filled the remaining holes, heaviest while new hires trained. The lower regular rate is shown as the same hiring choice appearing on the favorable side. What the next six months should show is set out last.
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NU513 Unit 2 questions, answered
What if my case gives no patient days?
Then look for another unit of service, such as visits, procedures or births, and flex the budget to that. If no volume measure exists at all, the analysis can still separate rate from hours, though it cannot isolate volume. State the limitation in a sentence. The sample flexes to patient days because inpatient nursing budgets are almost always built on them.
Is orientation a legitimate variance or a mistake?
Usually legitimate, and the analysis should say whether it was planned. Orientation hours are worked hours that produce no direct care yet, so they push a unit above its flexed budget. If the budget did not include them, the variance reflects a planning gap rather than inefficiency. The sample traces them to a specific hiring decision and weighs that decision's longer-term savings.
How detailed should the explanation be for each line?
Proportionate to its size. The sample spends most of its words on premium labor, the largest component, and a paragraph each on volume and orientation. Small supply or education variances can be grouped in a sentence. Many prompts also ask for a summary a busy executive could read in a minute, so lead with the largest items.