Assignment: Application Assignment NetRevenue and BudgetingNo one can predict the future, butaccountants and financial managers must try and do exactly that! Byexamining net revenue, costs, and cash flow, you can get a clearer picture ofwhat to expect in your organization’s (or one with which you are familiar)fiscal future. Using these metrics to look forward will enable you to moreeffectively plan budgets that accomplish organizational goals.When developing a budget, whatvariables do you have to take into account? In health care organizations, twoof the largest groups of factors that you must consider are first, volume, andsecond, staffing and supply. The number of patients and tests performed eachday, as well as employees and their pay rates are all crucial pieces ofinformation when determining a budget.In this Assignment, you address fivescenarios: net revenue, fixed and variable costs, cash flow, volume budget, andstaffing and supplies budget.Note: For those Assignments in this course that require youto perform calculations you must: ·Use the Excel spreadsheet template for the Week 5assignment.·Show all your calculations and formulas in the spreadsheet.·Answer any questions included with the problems (as text inthe Excel spreadsheet).A title and reference page are NOTneeded in this assignment. Put your name and assignment at the top of theExcel spreadsheet.For those not comfortable with theuse of Microsoft Excel, this week’s Optional Resources suggest severaltutorials.To prepare:Review the information in this week’s LearningResources regarding net revenue, fixed and variable costs, and cash flow,and how they are used in financial decision making. Review the budgeting information in Week 5 LearningResources dealing with volume, staffing, and supplies budget.View the following tutorial videos, provided in thisweek’s Learning Resources.Week 5 ApplicationAssignment Tutorial: Cash Flow ScenarioWeek 5 ApplicationAssignment Tutorial: Fixed Variable ScenarioWeek 5 ApplicationAssignment Tutorial: Net Revenue ScenarioWeek 5 ApplicationAssignment Tutorial: Staffing and Supply Budget ScenarioWeek 5 ApplicationAssignment Tutorial: Volume Budget ScenarioUse the Week 5 Application Assignment Template, provided in this week’s Learning Resources, tocomplete this assignment. Carefully examine the information in each of thescenarios and provide the necessary calculations. Using this informationwill help you answer the questions. Note: All the scenarios will be submitted as onedocument. Each scenario will be on a different tab in the spreadsheet.Scenario1: Net Revenue ScenarioYour clinic provides four kinds ofservices:Comprehensive initial medical consultation is priced at$250Established patient limited visit is priced at $75Established patient intermediate visit is priced at$125Established patient comprehensive visit is priced at$250Question: The profile of your patients is such that the averagecollection rate is 75%. Assuming you have 100 visits of each type each month,what amount of new revenue will you generate in the next 12 months?Scenario2: Fixed/Variable Cost ScenarioYou have performed a cost analysisof your health care organization and have determined the following: based onthe latest three years of information, your annual cost of operations is$1,600,000 with annual volume of 10,000 procedures. You have determined thatcertain of your supply items are fixed in nature (those marked with an F) whileothers are variable (marked with a V).Question: An insurance company that is considering directing its1,000 units per year of procedure business to your organization has approachedyou. For the last three years, you have been charging a price of $165 perprocedure (with a 100% collection rate). Your board has mandated that you make$5 of profit from each of the procedures. You obviously want the highestpossible price, but as you enter the negotiations, what is the lowest possibleprice you would be willing to accept from this payer?Hint: Calculate the variable cost.Scenario3: Cash Flow ScenarioYour new business venture will beginoperation on July 1, 20X2. You will hire staff effective January 1, 20X2 with acost of $40,000 per month. You know from experience that collections lagbilling by 3 months (in other words, once you bill for a service, you must wait90 days for the payment to be received.) Your business volume is projected tobe as follows: Question: If you have $380,000 of cash on hand on January 1, 20X2,how much cash will you have at the end of June 20X3? Assume a 100%collection rate.Scenario4: Volume Budget ScenarioYou manage lab services in a largehospital. You have the following data on both the hospital’s budgeted patientdays and visits for budget year 20XX along with the ratio of lab tests topatient days or visits.Question: Based on this raw data provided , how many lab tests wouldyou anticipate for the coming budget year? If each test is priced at $20.00,how much gross revenue would you budget? Assuming each full-time lab technician(FTE) can perform 200,000 tests each year, how many full-time lab technicianswould you plan for?Example on Template: 2 North Bldg calculated. You will need tocomplete 2 South Bldg, ICU and OPDScenario5: Staffing and Supply Budget ScenarioCalculate the supplies budgetnecessary to operate your unit for the fiscal year beginning January 1, 20X8.It is your expectation that you will perform 24,820 procedures in the budgetyear. The following spending data is available for the period January 1 toMarch 31, 20X7 during which time procedure volume amounted to 3,240. Itemsmarked (F) are considered fixed, those marked (V) are considered variable.Inflation is planned at 4%.In reviewing performance to date,you note that in January, you purchased $150,000 of D5W fluid replacementcharged to IV solutions, which represents an entire year’s supply. In addition,you returned $2,800 of office supplies for credit from the vendor in Febuary.These supplies were purchased in a previous fiscal year.You also need to prepare the salarybudget for the same fiscal year. You have determined that staff needs are for6.5 FTEs.A pay raise will be given to allstaff on October 1st of each year at a rate of 8 percent. In making yourcalculations, always round to the nearest whole dollar for annual salaryamounts, but keep pennies in the hourly pay rates. New staff begins the newfiscal year at $16.00 per hour.Be sure and include all of yourcalculations.
