Question

Three-level Revenue Forecast

Three eye-ear-nose-and-throat physicians decide to hire an experienced audiologist in order to add a new service line to their practice. They ask the practice manager to prepare a three level colume forecast as a first step in their decision making.

Assumptions: for the base level (most likely) revenue forecast, assume $200 per procedure time 4 procedures per day times 5 days equals 20 procedures per week times 50 weeks per year equals 1,000 potential procedures per year

For the best case revenue forecast, assume an increase in volume of one procedure per day average, for an annual increase of 250 procedures (5 days per week times 50 weeks equals 250). The best case is if the practice gains a particular care contract.

For the worst case revenue forecast, assume a decrease in volume of 2 procedures per day average, for an annual decrease of 500 proocedures. The worst case is if the practice loses a major payer.

Create the required table in an Excel document and submit the assignment via the link provided below.

The idea of this assignment is that since we cannot tell the future we often make assumptions of what is likely to happen. When we make assumptions, we tend to have a realistic idea of what could happen, a sense of a 'worse case' scenario, and a sense of a 'best case' scenario. Looking at these three options helps us anticipate future need and plan accordingly.

To complete this assignment, you must calculate the revenue forecasts at each level (and show your work), but you do notneed to create the line chart shown in Figure 17-5 (p. 209). In other words, just show your calculations -- do not worryabout creating a chart/graph.

Assignment Exercise 17-2 already provides you with the facts that you need. You are given the 'base level' forecast (which would be the same as the 'basic forecast' line in Fig. 17-5). From that you can use addition and subtraction to calculate the 'high forecast' (or 'best case') and 'low forecast' (or 'worst case') revenue amounts.  

You might find it helpful to use this format:

Best: best volume per year x rate per procedure = best revenue per year

Base: base volume per year x rate per procedure = base revenue per year

Worse: worse volume per year x rate per procedure = worse revenue per year

Answer 1

	Days in year	Procedures per day	Total Procedures	Rate per procedure	Revenue Amount
Best	250	5	1,250	$                         200	$            250,000
Base	250	4	1,000	$                         200	$            200,000
Worse	250	2	500	$                         200	$            100,000

Formulas Used:

Days in a year = 5 days per week * 50 weeks every year

Total Procedures (Volume per year) = Days in a year * Procedures per day

Revenue amount = Total procedures in a year * Rate per procedure