Which type of variance analysis computes the difference between actual results and a pre-prepared budget?

The concept of variance analysis is essential in healthcare finance, as it allows organizations to compare actual performance with budgeted expectations. The type of variance analysis that specifically computes the difference between actual results and a pre-prepared budget is known as simple variance analysis.

Simple variance analysis focuses on the straightforward comparison of actual financial outcomes to the budgeted figures. This approach is commonly used for assessing performance in various areas, including revenue, expenses, and overall profitability. By calculating the difference, organizations can easily identify variances—whether favorable or unfavorable—and explore the underlying reasons for those discrepancies.

In contrast, flexible variance analysis adjusts the budget to reflect the actual level of activity, which is useful for comparing performance when volume changes. Rate variance analysis typically involves examining how changes in rates affect revenues or expenses, while volume variance analysis focuses on the impact of differences in the volume of services provided. Each of these other analyses serves its distinct purpose but does not specifically address the comparison between actual results and a fixed pre-prepared budget in the direct manner that simple variance analysis does.