The chief accountant for Rainbow Community Hospital estimates that the hospital uses $0.60 kilowatt hours of electricity per patient-day, and that the cost of electricity will be $30 per kilowatt hour. The hospital also pays a fixed monthly charge of $15 000 to the electricity supplier to rent emergency backup electricity generators.


Construct a flexible budget for the hospital’s electricity costs using each of the following techniques.

1. A formula flexible budget.

2. A report form flexible budget for 20 000, 30 000 and 40 000 patient-days of activity. List variable and fixed electricity costs separately?

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