SMILE Orthodontic Clinic is a (fictional) Orthodontic Clinic located on the Gold Coast.

You are a managerial accountant that has been hired by the managing director of the Orthodontic Clinic to prepare the annual budget for 2021 and make recommendations for improving its operations.

The following information has been gathered about the clinic:

SMILE Orthodontic Clinic

Balance Sheet

As at 31 December 2020

Assets

Cash

156,000

Accounts Receivable

33,400

Orthodontic Equipment

650,000

Less: Accumulated Depreciation

( 120,000)

Total Assets

$719,400

Liabilities & Shareholder Equity

Accounts Payable

59,400

Bank Loan

400,000

Retained Earnings

260,000

Total Liabilities & Shareholders' Equity

$719,400

The orthodontic clinic is located in Burleigh and operates out of rented premises. The following table outlines the operating costs for the year.

Operating Costs

Payment

Utilities (Water & Electricity)

$100 / month

Paid quarterly

Insurance

$5 500 / year

Paid monthly

Lead Orthodontist Salary x1

$186 000 / year excluding on-costs

Paid monthly

Graduate Orthodontist x 1

$90 000 / year excluding on-costs

Paid monthly

Assistant Orthodontist x 2

$60 000 /year excluding on-costs

Paid monthly

Administration Staff Wages

$2 500/month

Paid monthly

General Office Expenses

$500 /month

Paid monthly

Rent

$1 000 /month

Paid monthly

Orthodontist supplies

$400 / month

Paid quarterly

Additional Background Information

Salaries:

There are two orthodontists (one who is a graduate) and two assistant

orthodontists. They are all paid an annual salary. It is estimated that their

on-costs are 30% of their annual salary. They work 37.5 hours per week.

Each appointment requires an orthodontist (lead or graduate) and an

assistant.

Each employees allowance for annual leave, public holidays and sick leave

amounts to 8 weeks per year. They are also given an allowance for non-

billable time of 2 hours per week which includes professional development,

department meetings and idle time.

Payments:

It is estimated that 30% of all operating expenses will be paid in the month

they are due and the remaining 70% will be paid in the following month.

Loan:

The business has an interest only loan. The interest is paid monthly. The

principle can be repaid at any time. The interest rate payable on the loan is

15% per annum.

Orthodontic

Depreciation on the Orthodontic equipment totals $20,000 for the year.

Equipment:

Depreciation is recorded monthly.

Repairs and

The orthodontic equipment repairs and maintenance is estimated to be

maintenance:

$700 each quarter payable in March, June, September, and December.

Cash

Twenty per cent (20%) of each month's professional services revenue is

collections:

collected during the month when the services are rendered and the

remainder is collected the month following service.

Ignore GST and Income Tax.

Expected patient visits for 2021 are indicated in the table below. 75% of the visits are expected to be half-hour appointments and the remainder will be one hours visits:

Expected

Patients

January 2021

300

February 2021

350

March 2021

320

April 2021

300

May 2021

350

June 2021

370

July 2021

380

August 2021

400

September 2021

400

October 2021

400

November 2021

400

December 2021

400

The average fees received for the two (2) different types of appointments are $110 for half an hour (30 minutes) and $330 for one hour (60 minutes).

PART ONE:

Budget Schedules & Expected Outcomes

Using the information provided, prepare the following operating and financial budgets for the twelve-month period from January 2021 to December 2021.

Operating Budgets:

1.Monthly Revenue

2.Labour Budget (including labour cost per appointment type)

3.Monthly Operating Expense Budget

Financial Budgets:

1.Budgeted Income Statement for the year ended 31 December 2021

2.Monthly Cash flow Budget for the year ended 31 December 2021

3.Budgeted Balance Sheet for the year ended 31 December 2021

Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document). The first worksheet should contain your raw/input data and assumptions from this assignment overview sheet. All future worksheets should be linked to this data. Show all calculations and use Excel functions where possible. While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.

PART TWO:

Analysis & Report to Managing Directors of Orthodontic Clinic

prepare report for the managing director of the orthodontic clinic. The report should include:

an overview of the expected results for the 2021 year including total sales, operating expenses and expected cash position;

a cost-volume-profit (CVP) analysis to indicate the breakeven point (in patients and revenue) and provide recommendations regarding how to improve the current margin of safety.

an analysis of the business operations (i.e. current incomes and expenses) and recommendations regarding how to improve the profitability of the orthodontic clinic. Use industry data (e.g. market rate for salaries) to support any recommendations for changes.

Use visual aids such as tables and graphs to enhance your report presentation.

The report should be submitted as a WORD (not PDF) document.