Health Care Finance; Operating Bugets and Capital Expenditre Budgets
Assignment Exercise 15–1: Budgeting
Select an organization; either Metropolis Health System from the Chapter 25 Case Study or
one of the organizations presented in the Mini-Case Studies in Chapters 26–28.
1. Using the organization selected, create a budget for the next fiscal year. Set out the
details of all assumptions you needed in order to build this budget.
2. Use the “Checklist for Building a Budget” (Exhibit 15-2) and critique your own
Assignment Exercise 15–2: Budgeting
Find an existing budget from a published source. Detail should be extensive enough to
present a challenge
Assignment Exercise 15–3: Transactions outside the Operating Budget
Review Figure 15-2 and the accompanying text.
Metropolis Health System has received a wellness grant from the charitable arm of an
area electronics company. The grant will run for twenty-four months, beginning at the first
of the next fiscal year. Two therapists and two registered nurses will each be spending half
of their time working on the wellness grant. All four individuals are full-time employees of
MHS. The electronics company has only recently begun to operate the charitable organi-
zation that awarded the grant. While they have gained all the legal approvals necessary, they
have not yet provided the manuals and instructions for grant transactions that MHS usually
receives when grants are awarded. Consequently, guidance about separate accounting is
not yet forthcoming from the grantor.
How would you handle this issue on the MHS operating budget for next year?
Assignment Exercise 15–4: Identified versus Allocated Costs in Budgeting
Review Figure 15-3 and the accompanying text.
Metropolis Health System is preparing for a significant upgrade in both hardware and
software for its information systems. As part of the project, the Chief of Information Oper-
ations (CIO) has indicated that the Information Systems (IS) department can change the
format of the MHS operating budgets and related reports before the operating budget is
constructed for the coming fiscal year. The Chief Financial Officer (CFO) has long wanted
to modify what costs are identified and what costs are allocated (along with the method of
allocation). This is a golden opportunity to do so. To gain ammunition for the change, the
CFO is preparing to conduct a survey. The survey will obtain a variety of suggestions for po-
tential changes in allocation methods for the new operating budget report formats. You
have been selected as one of the employees who will be surveyed
Assignment Exercise 16–1: Capital Expenditure Proposals
Ted Jones, the Surgery Unit Director, is about to choose his strategy for creating a capital
expenditure funding proposal for the coming year. Ted’s unit needs more room. The
Surgery Unit is running at over 90% capacity. In addition, a prominent cardiology surgeon
on staff at the hospital wants to create a new cardiac surgery program that would require
extensive funding for more space and for new state-of-the-art equipment. The surgeon has
been campaigning with the hospital board members.
What should Ted decide to ask for? How should he go about crafting a strategy to justify his
request, given the hospital’s new scoring system?
ANSWER FOR YOU...Exercise 15-1, 15-3, 15-4 and 16-1
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xxxxxxxx xxx Budget for Sample Hospital’x xxxxxx Pharmacy using the assumptions xx the xxxx Study
xxx source of revenue is xxxxx xx xxxxxxxxx prescribed and xxxx xx xxxxxxxxx xx the number of prescriptions. xxx study estimated daily xxxxxxxxxxxxx to xx 225 xxxxx xxxxx an annual estimate of xxxxxx for the first year. The xxxxxxx xxxxxxx xxx xxxxxxxxxxxx is assumed to be xxxxxx and multiplying this xx xxx xxxxx xxxxxx xx prescriptions xxxxx xx xxx total revenue of $2,587,613.
xxx data xxx xxxxxxxx were extracted from Exhibit xxxx of the mini-case xxxxxx
xxxxx variable expense amounted to xxxxxxxxxxx xxxxxxxxxx xx which xx xxxx of xxxxx xxx $14,400 xxx xxxxxxxx xxxxxxxx xxx xxxxx
xxxxx fixed expense as xxxxxxxx xxxxxx amounted to xxxxxxxxx
xxxxxx xxxxxxx xx xxxxxxxxxxxxxx xxxxxx
xxx Revenue $ xxxxxxxxxxxxxxxxxx xxxxxxxxx
Variable Expense xxxxxxxxx
xxxx xx Sales x xxxxxxxxxxxxxxxxxx 2,047,950
Contract xxxxxxxx xxx xxxx xxxxxx
xxxxx Expense xxxxxxx
Salaries xxx xxxxx 192,000
Materials and Supplies 12,000
xxxxxxxxxxxx and xxxxxxxxxxxx 15,333
xxxxxxxxx for Bad Debts xxxxxx
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xxxxxx xx 15-2
The following xx a copy of xxxxxxxxxx news xxxxxxxx from xxx website of Fort St. John City.
Searching xxx a published xxxxxxxxx xxxxxx xx x xxxxxxx business xxxxxx proved xx be very difficult xxx my xxxxxxxx most xxxxxxxx published xxxx xxx xx Operating Income. The components xx xxx xxx xxx xxx same however xxx xxxxx one is a plan - target revenue and expenses while the xxxxxx was xxxxxxx xxxxxxxxxxx xxx xx xxxx xxxxxxxxxxx xxx xxxx hesitancy, x xxxxxxxx of the city budget xx xxxx xxx xxxx was undertaken.
xxxx St. John City HallErica Fisher
Scope xx operating projects xxxxxxx to help balance xxxxxx
In order xx xxxxxxx Fort St. xxxx’s xxxx xxxxxxxxx xxxxxxx xxxxxxxx xxxx xx xxxxxx xxxx xxx Tax Stabilization xxxxxxxx xxxxx is xxxx over xxxx of xxx xxxxx million used xxxx xxxxx xxxx’x down xxxx the xxxxx xxxxxxx originally xxxxxxxxx xx October.
Transferring xxx xxxxxxxxxxxxx funds xx xx xxxxxxxx
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xxxxxx xx HW 15-3
xxx wellness xxxxx xxxxxxxx by xxx hospital from x charitable xxxxxxxxxxx is a transaction xxxxxxx of xxx operating xxxxxxx It xxx x xxxxxxxx accounting procedure. xxxxxxxxxx xx should not xxxxxx xxx operating budget. xx xxxx xxxx however, four of the hospital’s xxxxxxxxx employees were assigned xx the program xxx half-day’s work. The employees, xxxxx xxxxxxx employees, and their xxxxx xxxxxxxx to the program an official xxxxxxxxxxx can not be xxxx less xxxx xxxxx xxxxxxx xxxxxxxxx xxxxx salaries and benefits xxx xxxxx xxx are xxxxxxxxx xx the xxxxxxxx’x xxxxx xxxxxxxxx xxx xxxxxxxxxx has to hire xxxxxxxxx xxxxxxxxxx xxxxx xxx therapist equivalent to x FTEs to xxxxxxx xxxxxx xxxx by xxx xxxxxxxxx xxxxxxxx to xxx xxxxxx This xxxxx entail xxxxxxxxxx expense to xxx hospital which xxxx xx xxxxxxxxx xx xxx xxxxxxxx xxxxxxx xx service xxxxxxxx expense.This xxxx diminish xxx hospital’x xxxxxxxxx income by a xxxxxxxxxx xxxxx amount xxxxxxxx to xxx over-all benefits gained from xxx grant albeit xxx xxxxxxxxx xx the xxxxxxxxx xxxxxxx
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x am xxx head xx the xxxxxxxxx unitof xxx Nursing Practice xxx xxxxxxxxxxxxxxxxx staff xxxxxxxx six full-time xxxxxxxxxx xxxxxx xxx six xxxxxxxxxxxx xxxxx xxxx be two full-timers xxx xxx xxxxxxxxxxx at anyone time during xxx xx hour xxxxxxxxxx
xxx following xxx the identifiable xxxxxxxxx xxxxxxxx xx my unit:
xx xxxxxxxx xxx wages
xx employee xxxxxxxx
xx xxxxxxx xxxxxxxx xxx depreciation xx equipments xx the ER
5. Employee xxxxxxx
xx Payroll taxes
xxxxxxxx xxxx xx xxxx is xxxxx 10% xx xxxxxxx nursing staff, I would estimate xxx identifiable xxxx given xxx xxxx xxxxx to xx $502,500 + 12/500(240,000+1,130,000+1,900,000)
xxx xxxx xx xxx expenses should xx allocated xxx marked A in xxx xxxxx below. Those data
xxxxxxxxx expenses for xxx xxxxx MHS and I would xxxxxxx a proportionate xxxxxx be allocated xx xx unit.I xxxxx xxxx xxxxxxxxxx xxxxxxxxx xxxx of xxx xxxx’x xxxxxxxxxxxx to xxxxx xxxxxxxxxxxx xx determine xxxx proportion.
xxxxxxxxxx Health xxxxxx
Schedule of Operating Expenses
xxx xxx xxxx xxxxx March 31, xx
xxxxxxx xxxxxxxxxxxxxxxx xxxxxxxxxx x
Operating xxxxxxxxxxxx x
xxxxxxxxx xxxx xxxxx xxxxxxx I
xxxxxxxxxx 150,000 I
xxxxx xxxxxxx x
xxxxxxx xxxxxxxxxx x
xxxxxxxxxxx xxxxxxxxx A
Laundry xxxxxxx x
Housekeeping 470,000 A
Security 50,000 A
xxxxxxx Records xxxxxxx A
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xxxxxx to Ex.16-1
xx xx the xxxxxxxxxxxxxx xx the xxxxxxx xxxx xxxxx Ted xxxxxx to weigh which xx xxx xxx capital xxxxxxxxxxx proposals(proposal for additional rooms or xxxxxxxx xxx xxxxxxxx xx a xxx xxxxx of xxx art equipment being pushed xx x xxxxxxxxx xxxxxxxx xx present to xxx board.
x thorough analysis xx the xxx projects is xxxxxx as decision xxxxxxxxx xxxxxxx xxxxxxxxxxxx xx xxx xx the xxxxx and sensitive xxxxxxxxxx xxxxxxxxx that xxxx xxxxxx the xxxxxxxxxxxxx xx x business. xxxx is so because xx xxxxxxxx x relatively xxxxx xxxxxx of money being xxxxxxxxx xx x xxxxxxx for x xxxx xxxxxx xx time. xx is the xxxx factor xxxx xxxx risk xx xxxxxxx investment, xx there is opportunity cost xx be xxxxxxxxxxx Moreover, certain assumptions regarding time xxxxx of money may xxxxxxxxx xx xxxxxx xxxxxxx xxxxxx is xxxxxxxxx problem- xxxxxxx investment is not easily xxxxxxxxxx to xxxxx If xxx xxxxxxx after x xxxxx one realizes xx xxx x xxxxx xxxxxxxxx xx can xxx xxxxxx xxx
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