Question

Review the information presented below in the Sample Operating Budget and adjust this budget according to the following:

You have just learned that inpatient charges will probably be 3% higher than projected and that outpatient charges are expected to increase by 8%, and that your research grant support will be reduced by half.

The continuing education conference projected to net $3,200 has been canceled.

Salary expenses will likely be 2% higher than originally anticipated.

You are required to show a projected net profit of at least 50% of total revenue. If your revised budget generates less than this level of net profit or surplus, indicate where you can probably cut expenses to meet the target and explain why the expenses you have chosen to cut are your best choices.

Sample Operating Budget—Department of Physical Therapy

(July 1, 20n1, through June 30, 20n2)

I. Revenue and Income

A. Inpatient Charges           $550,000

B. Outpatient Charges                             310,000

C. Research Grant Support                      29,000

D. Continuing Education Conference         3,200

E. Supplies and Equipment Sales          11,500

       Total Revenue                                     $903,700

II. Expenses

     Direct Expenses

A. Salaries                                      $260,000

B. Consultant                                  2,500

C. Honorarium                                1,500

D. Minor Equipment                       6,000

E. Equipment Rental                       2,000

F. Travel                                           2,500

G. Telephone                                   5,000

H. Supplies                                      6,000

I. Postage                                        350

J. Copy Machine Rental                 11,000

K. Advertisement                             1,500

L. Dues                                               800

M. Books                                            350

N. Equipment Maintenance and Service Contracts       2,000

       Total Direct Expenses                                            $301,500

III. Indirect Expenses

A. Employee Benefits (23%)                                        $59,800

B. Administration                                                          23,000

C. Equipment Depreciation                                          7,200

D. Physical Plant Operation                                          39,000

E. Maintenance and Repairs                                          2,000

F. Building Depreciation                                                6,000

G. Laundry/Linen                                                        2,500

H. Housekeeping                                                           4,900

        Total Indirect Expenses                 $144,400

       Total Expenses                               $445,900

       Net Profit or Loss                          $457,800

Answer 1

I. Revenue and Income

A. Inpatient Charges           $5,66,500

B. Outpatient Charges                             3,34,800

C. Research Grant Support 14,500

D. Continuing Education Conference Nil

E. Supplies and Equipment Sales          11,500

       Total Revenue                                     $9,27,300

II. Expenses

     Direct Expenses

A. Salaries                                      $265,200

B. Consultant                                  2,500

C. Honorarium                                1,500

D. Minor Equipment                       6,000

E. Equipment Rental                       2,000

F. Travel                                           2,500

G. Telephone                                   5,000

H. Supplies                                      6,000

I. Postage                                        350

J. Copy Machine Rental                 11,000

K. Advertisement                             1,500

L. Dues                                               800

M. Books                                            350

N. Equipment Maintenance and Service Contracts       2,000

       Total Direct Expenses                                            $306,700

III. Indirect Expenses

A. Employee Benefits (23%)                                        $59,800

B. Administration                                                          23,000

C. Equipment Depreciation                                          7,200

D. Physical Plant Operation                                          39,000

E. Maintenance and Repairs                                          2,000

F. Building Depreciation                                                6,000

G. Laundry/Linen                                                        2,500

H. Housekeeping                                                           4,900

        Total Indirect Expenses                 $144,400

       Total Expenses                               $451,100

       Net Profit or Loss                          $476,200

Net pofit is 51.35% of total revenue. hence, no expenses has to be cut.