Select an organization: either from the Case Studies in Chapters 2728 or from one of the Mini-Case Studies inChapters 2931.

Exhibit 152 Checklist for Building a Budget

1. What is the proposed volume for the new budget period?

2. What is the appropriate inflow (revenues) and outflow (cost of services delivered) relationship?

3. What will the appropriate dollar cost be?(Note: this question requires a series of assumptions about the nature of the operation for the new budget period.)

3a. Forecast service-related workload.

3b. Forecast non-service-related workload.

3c. Forecast special project workload if applicable.

3d. Coordinate assumptions for proportionate share of interdepartmental projects.

4. Will additional resources be available?

5. Will this budget accomplish the appropriate managerial objectives for the organization?

Question:

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 152) and critique your own budget.

CHAPTER 29 Mini-Case Study 1: Proposal to Add a Retail Pharmacy to a Hospital in the Metropolis Health System

Sample General Hospital 3-Year Retail Pharmacy Profitability Analysis

		Year 1	Year 2	Year 3
Rx Sales		2,587,613	2,692,152	2,828,375
Cost of Goods Sold		2,047,950	2,088,909	2,151,576
Gross Margin		539,663	603,243	676,799
GM %		20.9%	22.4%	23.9%
EXPENSES
Salaries and Wages		192,000	197,760	203,693
Benefits		38,400	39,552	40,739
Materials and Supplies		12,000	14,400	17,280
Contract Services and Fees		14,400	17,280	20,736
Depreciation and Amortization		15,333	15,333	15,333
Interest
Provision for Bad Debts		25,876	26,922	28,284
Misc. Exp.		3,600	4,320	5,184
Total Expense		301,609	315,567	331,248
Net Income		238,053	287,676	345,550
Operating Margin		9.2%	10.7%	12.2%
	Cash Flow
		Year 1	Year 2	Year 3
Sources
Net Income		238,053	287,676	345,550
Depreciation		15,333	15,333	15,333
Borrowing
Total Sources		253,386	303,010	360,884
Uses
Capital Purchasing		130,000
Working Capital		49,789
Total Uses		179,789
Cash at Beginning of Period			73,597	376,607
Net Cash Activities		73,597	303,010	360,884
Cash at Ending of Period		73,597	376,607	737,490
	Volume
		Year 1	Year 2	Year 3
Number of Prescriptions Sold		55,350	56,457	58,151