| Course | NURS 523 Financial and Resource Management for Nurse Leaders (NURS523) |
|---|---|
| Module/Week | 5 |
| Assignment | Financial Exercise 3 on Variance Analysis and Financial Ratios |
| Paper type | Financial exercise answering a series of questions with calculations |
| Length | about 962 words, 3 double-spaced pages plus title page and references. Course guide: a worked set of finance questions on controlling results and reading financial statements, with an APA title page and reference list, using the textbook and sources from the past 5 years |
| Format | APA 7 student paper |
| Points | 100 |
| School | Liberty University Online |
| Program | MSN |
| Where it sits | Module/Week 5 in Liberty's published NURS 523 course guide; current sections can differ |
| Updated | October 2026 |
Free sample paper for NURS 523 Week 5
Financial Exercise 3: A $33,722 Labor Overrun Broken Into Volume, Quantity and Price Variances, With Three Hospital Financial Ratios
[Student Name]
School of Nursing, Liberty University
NURS 523: Financial and Resource Management for Nurse Leaders
Financial Exercise 3
[Instructor Name]
[Date]
The unit, hospital and figures are a composite written for a model exercise; answer the questions and use the data your course provides.
Financial Exercise 3: A $33,722 Labor Overrun Broken Into Volume, Quantity and Price Variances, With Three Hospital Financial Ratios
Question 1: Prepare the Static Budget, Flexible Budget and Actual Result
The unit budgeted an average daily census of 28 for March, or 868 patient days, with 5.6 registered nurse hours per patient day at an average rate of $42 an hour. The census actually averaged 30, or 930 patient days. Registered nurses worked 5,394 hours at an average rate of $44.10.
| Item | Static budget | Flexible budget | Actual |
|---|---|---|---|
| Patient days | 868 | 930 | 930 |
| RN hours per patient day | 5.6 | 5.6 | 5.8 |
| RN hours | 4,860.8 | 5,208 | 5,394 |
| Average hourly rate | $42.00 | $42.00 | $44.10 |
| RN labor cost | $204,154 | $218,736 | $237,875 |
The total variance is $237,875 minus $204,154, or $33,722 unfavorable. Jones et al. (2019) explain that this figure on its own is not useful for control, because it mixes the effect of more patients with the effects of how many hours were used and what each hour cost. The flexible budget, which applies the original standards to the actual 930 patient days, separates them.
Question 2: Calculate and Explain the Three Variances
Volume variance = flexible budget minus static budget = $218,736 minus $204,154 = $14,582 unfavorable. The unit cared for 62 more patient days than planned, and at the budgeted standard those patients required $14,582 more in nursing labor. This variance is unfavorable in arithmetic but not in management terms, because the unit served more patients and generated more revenue.
Quantity variance = (actual hours minus flexible budget hours) times budgeted rate = (5,394 minus 5,208) times $42 = 186 times $42 = $7,812 unfavorable. The unit used 5.8 hours per patient day instead of 5.6. The cause could be higher acuity, inefficiency, or extra hours for orientation, and the manager must find out which.
Price variance = (actual rate minus budgeted rate) times actual hours = ($44.10 minus $42.00) times 5,394 = $2.10 times 5,394 = $11,327 unfavorable. Each hour cost $2.10 more than planned, most likely because of overtime and contract nurses at premium rates.
Check: $14,582 plus $7,812 plus $11,327 = $33,721, which matches the total variance of $33,722 within rounding.
Split this way, the overrun tells a clearer story: nearly half came from caring for more patients, and the rest came from using slightly more hours and paying more for each of them.
Question 3: Why Is the Price Variance So Large?
The price variance reflects the cost of filling hours with premium labor. When the census rose and two nurses were on leave, the unit covered shifts with overtime at time and a half and with agency nurses billed above staff rates. Recent evidence shows how expensive that pattern becomes over a year. At seven hospitals in one academic medical center, Razmpour et al. (2026) found that vacancies took about 21.7 weeks to fill and that roughly three quarters of the hours left open by departing nurses were covered by contract labor, pushing the cost of each turnover event to $85,498. Reliance on temporary staff may also affect how long patients stay. Polancich et al. (2023) compared permanent and travel registered nurse staffing with outcomes during the pandemic and found that more permanent registered nurse FTEs went with shorter average length of stay (r = -0.568), while more travel nurse FTEs went with longer stays (r = 0.688). Correlations with infections and falls were not significant, so the study does not show that travel nurses caused harm, but longer stays cost the hospital money it is rarely paid for. For the manager, the lesson is that the price variance is not only a budget problem; it is a signal that the unit's permanent staffing is too thin for its census.
Question 4: What Should the Manager Report and Do?
The manager's variance report should explain each variance in one or two sentences and state an action. It should also avoid two habits that weaken credibility with finance: blaming every overrun on acuity without data, and promising savings the manager cannot deliver. Before writing the report, the manager would check the staffing system for the shifts that used overtime or agency nurses, review acuity scores for March, and confirm how many orientation hours were charged to the unit. With those facts in hand, each variance can be explained accurately. A model explanation would read: "RN labor was $33,722 over the static budget. Of this, $14,582 reflects a census 7% above budget and is offset by higher revenue. The quantity variance of $7,812 reflects 0.2 more hours per patient day, related to two orientees on the unit in March; it should resolve in April. The price variance of $11,327 reflects overtime and agency coverage for two leaves of absence; I am requesting approval to post one additional RN position to reduce premium pay." Jones et al. (2019) recommend that managers explain variances promptly and focus on causes they can act on, which this report does.
Question 5: Calculate and Interpret Three Hospital Financial Ratios
The hospital's statements show current assets of $84 million, current liabilities of $52 million, operating revenue of $610 million, operating expenses of $598 million including $34 million of depreciation, and cash and investments of $96 million.
Current ratio: $84 million of current assets over $52 million of current liabilities gives 1.62. The hospital has $1.62 in short-term assets for each dollar of short-term obligations, which suggests it can pay its bills as they come due.
Operating margin: the $12 million left after operating expenses, taken as a share of $610 million in operating revenue, is 2.0%. The hospital earns about two cents on each dollar of operating revenue, a thin margin that leaves little room for unbudgeted spending.
Days cash on hand: cash of $96 million, set against one day of cash operating expense, gives $96 million divided by (($598 million minus $34 million) divided by 365) = $96 million divided by about $1.55 million a day = 62 days. The hospital could operate for about two months on its cash reserves.
For nurse managers, these ratios explain why finance pays close attention to labor variances. With a 2% operating margin, a few units running persistent price variances can erase the hospital's surplus, which is why a manager who explains variances clearly and proposes fixes, such as converting premium hours into permanent positions, earns credibility in budget discussions.
References
Jones, C. B., Finkler, S. A., Kovner, C. T., & Mose, J. N. (2019). Financial management for nurse managers and executives (5th ed.). Elsevier.
Polancich, S., Miltner, R., Montgomery, A., Dick, T., Poe, T., Brown, D., & Patrician, P. A. (2023). Quality matters: Examining the impact of nurse staffing challenges on clinical outcomes. Journal of Healthcare Management, 68(3), 174-186. https://doi.org/10.1097/JHM-D-22-00170
Razmpour, O., Pappas, S., Bouvier, M., Mian, S., Lee, D. K. K., & Cimiotti, J. P. (2026). Operationalizing the RETAIN framework: Calculating the cost of nurse turnover in practice. Nursing Outlook, 74(2), Article 102694. https://doi.org/10.1016/j.outlook.2026.102694
What the NURS 523 Week 5 instructions ask
The third and last financial exercise uses the format of the first two: a set of course questions about finance in nurse administration, answered with the textbook and with scholarly sources no more than five years old, and submitted with an APA title page and references. It is due in Module/Week 5, together with the 50-point annotated bibliography for the resource management paper. The reading that week, Jones and colleagues on controlling results and on financial statements, points to questions on variance analysis, flexible budgets and the ratios hospitals use to judge liquidity, profitability and cash reserves. Your course provides the exact questions and data.
How this NURS 523 Week 5 example is built
The sample answers five questions. It first sets out the static budget, the flexible budget and the actual result for one month in a single table, so every later number can be traced. It then calculates the volume variance, the quantity or efficiency variance, and the price or rate variance, shows that they add up to the total overrun, and explains the likely cause of each. A short answer on what the manager should report models the language of a variance explanation. The last questions calculate the current ratio, operating margin and days cash on hand from composite hospital figures and say what each means for nursing. Two recent studies on contract labor support the explanation of the price variance.
NURS 523 Week 5 grading rubric: where the points go
The third exercise is usually graded on correct variance calculations and labeling, the use of a flexible budget, sound explanations of causes, correct ratio calculations and interpretation, and APA format. Graders often check that the three variances sum to the total, which is a quick test of method. Labeling each variance as favorable or unfavorable is required for full credit. Explanations earn more when they separate what the manager controls from what the manager does not, for example more patients versus higher hourly rates. For the ratios, credit follows interpretation: a current ratio of 1.62 is only half an answer until the paper says whether the hospital can meet its bills.
NURS 523 Week 5 help: mistakes that cost points
The heaviest losses on this exercise come from setting actual spending against the static budget alone, which hides the effect of a higher census, or by mixing up which hours and which rate belong in the quantity and price formulas. Others leave each variance unlabeled, so the reader cannot tell good news from bad, or explain every overrun as "higher acuity" without evidence. On ratios, a common error is including depreciation in the daily expense figure for days cash on hand. Build the flexible budget first, write each formula before filling it in, check that the variances add up, and explain each one in terms a director would accept.
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Other NURS 523 weeks
- NURS 523 Week 2: Discussion Board Forum 1
- NURS 523 Week 3: Financial Exercise 1
- NURS 523 Week 4: Financial Exercise 2
- NURS 523 Week 6: Question Set
- NURS 523 Week 7: Discussion Board Forum 3
- NURS 523 Week 8: Resource Management Paper
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NURS 523 Week 5 questions, answered
What is NURS 523 Financial Exercise 3?
It is the third and final financial exercise, worth 100 points in Module/Week 5, usually covering variance analysis, flexible budgets and financial statement ratios, submitted in APA format.
Where can I find a free NURS 523 Week 5 sample paper?
This page shows the NURS 523 Week 5 exercise splitting a labor overrun into volume, quantity and price variances, plus three hospital ratios, worked in full and free to read.
What is a flexible budget variance in nursing?
A flexible budget recalculates what a unit should have spent at the volume it actually had, so the difference between actual and flexible spending shows efficiency and price effects separately from volume.
How do you calculate a labor price variance?
Multiply the difference between the actual and budgeted hourly rate by the actual hours worked; a positive result means the unit paid more per hour than planned, an unfavorable variance.
What does days cash on hand measure?
It estimates how long the hospital's cash would last if no new money came in, found by dividing cash by one day's operating expense with depreciation taken out.
Use it as a model, or ask for your own
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