Homework 4 solution:

The hospital has hired a new CFO who believes every cost and revenue center should construct flexible budgets reflecting forecasted output and the final budget should be based on actual output. A. The urgent care manager must resubmit her budget based on 2015 projected visits. The 2015 budget should be based on actual expenses and visits incurred during the first seven months of 2014. Cost standards (2014) and budget standards (2015) must be prepared for all variable costs (indicated by a V behind the object code description). All fixed costs (F) should be projected using the incremental budgeting methodology. Projected visits is 2015 is 52,560. Salary and fringe benefit (object codes 4000-4199) increases for all personnel should be estimated at 3% except for health insurance (4120) which is expected to increase by 10%. Input price increases for supplies and other costs (4200-4960) should be increased by 2% except for medications, 6% increase and profession insurance, 8%. All increases are effective January 1, 2015. The budget report, BudgetCh06. Problem 6.1 tab, shows the urgent care centers expenses for 2013 and the actual and budgeted expenses for the first seven months of 2014. The CEO has requested all department heads submit their 2015 operating budget by Tuesday, November 4, 2014. The 2015 fiscal year begins January 1, 2015. B through D on page 2 Total Visits 51,986 30,331 30,672 52,560 Qbi.Cod Description 2013 ctual 2014 Budget 2014 Budget 2015 4010 Physician salaries - V 4020 Nursing staff salaries - V 4030 Management & clerical salaries F 4110 FICA-F 4120 Health Insurance F 4130 Retirement F 4140 4211 Medications- V 1,380,000 780,000 238,680 390,000 124,800 31,200 148,152 $960,000 $585,306 $576,800 857,157 466,971 143,397 238,760 76,763 18,323 91,687 829,150 468,650 143,407 234,325 74,984 18,746 89,015 Unemployment -F The hospital has hired a new CFO who believes every cost and revenue center should construct flexible budgets reflecting forecasted output and the final budget should be based on actual output. A. The urgent care manager must resubmit her budget based on 2015 projected visits. The 2015 budget should be based on actual expenses and visits incurred during the first seven months of 2014. Cost standards (2014) and budget standards (2015) must be prepared for all variable costs (indicated by a V behind the object code description). All fixed costs (F) should be projected using the incremental budgeting methodology. Projected visits is 2015 is 52,560. Salary and fringe benefit (object codes 4000-4199) increases for all personnel should be estimated at 3% except for health insurance (4120) which is expected to increase by 10%. Input price increases for supplies and other costs (4200-4960) should be increased by 2% except for medications, 6% increase and profession insurance, 8%. All increases are effective January 1, 2015. The budget report, BudgetCh06. Problem 6.1 tab, shows the urgent care centers expenses for 2013 and the actual and budgeted expenses for the first seven months of 2014. The CEO has requested all department heads submit their 2015 operating budget by Tuesday, November 4, 2014. The 2015 fiscal year begins January 1, 2015. B through D on page 2 Total Visits 51,986 30,331 30,672 52,560 Qbi.Cod Description 2013 ctual 2014 Budget 2014 Budget 2015 4010 Physician salaries - V 4020 Nursing staff salaries - V 4030 Management & clerical salaries F 4110 FICA-F 4120 Health Insurance F 4130 Retirement F 4140 4211 Medications- V 1,380,000 780,000 238,680 390,000 124,800 31,200 148,152 $960,000 $585,306 $576,800 857,157 466,971 143,397 238,760 76,763 18,323 91,687 829,150 468,650 143,407 234,325 74,984 18,746 89,015 Unemployment -F