Typing flexible budgets to productivity standards

The purpose of this project was to determine the feasibility of tying flexible budgets to productivity standards. The setting of this study was the radiology department of Northridge Hospital Medical Center. A microcomputer model was developed for this process. A flexible budget had to be created and tied to the department's current productivity standards. This included determining which job codes should be fixed and which should fluctuate with volume. An analysis then had to be performed, to measure the benefits of the new system, against the older, fixed budget system. The analysis was divided into three categories: revenue, labor expenses, and material and services expenses. Although the analysis was only performed on two months of data, the results showed that this type of budget was very worthwhile. Under this budget, the department head could be held accountable for accurate information. In the pages that follow, a step by step description of the model that was developed is presented. Also included is a history of the current budget system and the events which led to the development of a flexible budget tied to productivity standards.