Certified Nurse Manager and Leader (CNML) Practice Test

What formula is used to calculate variance in budgeted amounts?

1. Variance $ / Contracted $ X 100

2. Variance $ / Actual $ X 100

3. Variance $ / Budgeted $ X 100

4. Variance $ / Total Cost $ X 100

The correct answer is: Variance $ / Budgeted $ X 100

The formula used to calculate variance in budgeted amounts specifically focuses on how the actual performance compares to the budgeted expectations. By using the budgeted amount as the denominator in the formula, you can effectively assess the percentage variance in relation to what was initially planned. This provides a clear context of how much deviation has occurred from the expected budgeted figures. The budgeted amount serves as a benchmark, allowing managers to evaluate performance, identify areas needing attention, and adjust forecasts or resource allocations accordingly. Using variance $ (the difference between budgeted and actual amounts) over the budgeted $ multiplied by 100 yields a percentage that reveals whether expenses were under or over the budget, thus offering critical insights into financial management within a nursing unit or healthcare facility. Other formulas may reference different aspects of costs or revenues which do not align with the specific context of reviewing budget versus actual expenditures.