Financial Control and Planning

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PART 2: GROUP COURSEWORK
SECTION 1

1. Calculate patient revenue (on an accrual basis) for the coming year.

As indicated in the question, Private insurance and Self-Pay pay full charge, so we need to make a price list for these two types of payers and calculate the special price for NHS. - Oncology Program:

Revenue from Private insurance = 50000*120*30% = 1,800,000
Revenue from National Health Service funded = 40,000*120*50% = 2,400,000 Revenue from Self-Pay = 50000*120*10% = 600,000
Total revenue for Oncology Program =1,800,000+600,000 +2,400,000= 4,800,000 * Cardiac Program:
Revenue from Private insurance = 40000*80*20% = 640,000
Revenue from National Health Service funded = 30,000*80*60% = 1,440,000 Revenue from Self-Pay = 40000*80*10% = 320,000
Total revenue for Cardiac Program = 640,000+ 1,440,000+ 320,000 = 2,400,000 * Rhinoplasty Program:
Revenue of Private insurance = 25,000*40*10% = 100,000
Revenue of National Health Service funded = 10,000*40*20% = 80,000 Revenue of Self-Pay = 25,000*40*60% = 600,000
Total revenue forRhinoplasty Program = 100,000 + 80,000 +600,000 = 780,000 Program| List price per patient| Special price per patient NHS| Total number of patients| PrivateInsurance| National Health Service funded| Self – Pay| Total per program| Oncology| 50,000| 40,000| 120| 1,800,000| 2,400,000| 600,000| 4,800,000| Cardiac| 40,000| 30,000| 80| 640,000| 1,440,000| 320,000| 2,400,000| Rhinoplasty| 25,000| 10,000| 40| 100,000| 80,000| 600,000| 780,000| | | 2,540,000| 3,920,000| 1,520,000| 7,980,000|

2. Calculate the endowment revenue (on an accrual basis) for the coming year

* Total interest income from £500,000 in UK Treasuries dated 2020 – 2025 at 6% per annum = £500,000* 6% = £30,000 * Total dividend income from £250,000 in BT preference shares which pay 8% per annum = £250,000 * 8% = £20,000 * Total bond income from £250,000 bond at 2%( 1,5% + 0.5%) in the coming year = £250,000*2% = £5,000 * Therefore, total endowment revenue = £30,000+ £20,000 + £5,000 = £55,000

3. Prepare a revenue budget (on an accrual basis), including all sources of revenue as discussed previously.

Patient revenue| £7,980,000|
Endowment revenue| £55,000|
Gift shop revenue| £120,000|
Total revenue| £8,155,000|

SECTION 2

4. Calculate the expected bad debt expenses on an accrual basis for the coming year.

As mentioned in the case study, there are 25% of self-pay charges that become a bad debt.

Therefore, expected bad debt expenses equal £1,520,000 * 25 % = £380,000

5. Calculate an expense budget on an accrual basis for the coming year.

Salaries| £6,900,000 |
Supplies| £540,000 |
Rent for buildings and equipment| £300,000|
Depreciation| £100,000 (=£500,000/5)|
Bad debts| £380,000|
Total expenses| £8,220,000 |
6. Combine the revenue (Section 1) and expense budgets to present an operating budget for the coming year.

REVENUESPatient revenueEndowment revenueGift shop revenueTotal revenue| £7,980,000£55,000£120,000£8,155,000| LESS EXPENSESSalariesSuppliesRent for buildings and equipmentDepreciationBad debtsTotal expenses| £6,900,000 £540,000 £300,000£100,000 £380,000£8,220,000 | OPERATING BUDGET| (£65000) |

SECTION 3

7. Prepare the expense budget as a responsibility centre budget showing the projected costs for each department (Radiology, Nursing and Administration).

| Radiology| Nursing| Administration| Total|
Salaries| £2,000,000| £4,400,000| £500,000| £6,900,000 | Supplies| £360,000| £160,000| £20,000| £540,000|
Total| £2,360,000| £4,560,000| £520,000| £7,440,000 | 8. Prepare an expense budget with expenses shown by program (Oncology, Cardiac, Rhinoplasty). Assume that bad debts are not assigned to specific programs.

Total salaries for Oncology program = (£2,000,000*80%) +...
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