Bridgestone Behavioral Health Center: Cost-Volume-Profit (Cvp) Analysis
Bridgestone Behavioral Health Center: Cost-Volume-Profit (CVP) Analysis
INTRODUCTION
In June of the current year Dr. Thomas Russell, Executive Director, and Susan Smyth, Accountant, at the Bridgestone Behavioral Health Center were discussing the necessity of gaining a better understanding of how to monitor the Center’s operating and financial performance. Located in Cleveland, Ohio, Bridgestone provides prevention, intervention, and treatment services for individuals with substance abuse problems. Bridgestone’s management is concerned about its financial performance after realizing a loss in the prior year although a small profit was projected. Despite management’s concern and attention of Bridgestone’s profitability troubles, the Center’s annual budget once again contains a projection for a meager profit of $6,300 (see Exhibit 1).
Thomas: According to the financial reports that you have prepared, we have been fighting to reach breakeven over the past three years. We have been able to just get past breakeven recently, but I am worried—it seems like only a slight variation in our operations could throw us into an operating loss. I’ve been actively involved in managing the Center, and I don’t understand how we avoid showing a loss!
Susan: Unfortunately, I have no oversight with respect to monitoring performance since my job is to input the financial and units of service numbers into the accounting system as they occur. I am currently working more than 40 hours a week so I am not sure what else I could do. Maybe we can hire someone like a consultant to help us? Thomas: In reality, securing some outside assistance seems to be a good option to avoid future losses. Since my training is in psychology, I don’t have the accounting background to take the task on myself. We need someone who specializes in financial management for nonprofit human service organizations.
BRIDGESTONE BACKGROUND
History and Mission Bridgestone is a comprehensive outpatient
INTRODUCTION
In June of the current year Dr. Thomas Russell, Executive Director, and Susan Smyth, Accountant, at the Bridgestone Behavioral Health Center were discussing the necessity of gaining a better understanding of how to monitor the Center’s operating and financial performance. Located in Cleveland, Ohio, Bridgestone provides prevention, intervention, and treatment services for individuals with substance abuse problems. Bridgestone’s management is concerned about its financial performance after realizing a loss in the prior year although a small profit was projected. Despite management’s concern and attention of Bridgestone’s profitability troubles, the Center’s annual budget once again contains a projection for a meager profit of $6,300 (see Exhibit 1).
Thomas: According to the financial reports that you have prepared, we have been fighting to reach breakeven over the past three years. We have been able to just get past breakeven recently, but I am worried—it seems like only a slight variation in our operations could throw us into an operating loss. I’ve been actively involved in managing the Center, and I don’t understand how we avoid showing a loss!
Susan: Unfortunately, I have no oversight with respect to monitoring performance since my job is to input the financial and units of service numbers into the accounting system as they occur. I am currently working more than 40 hours a week so I am not sure what else I could do. Maybe we can hire someone like a consultant to help us? Thomas: In reality, securing some outside assistance seems to be a good option to avoid future losses. Since my training is in psychology, I don’t have the accounting background to take the task on myself. We need someone who specializes in financial management for nonprofit human service organizations.
BRIDGESTONE BACKGROUND
History and Mission Bridgestone is a comprehensive outpatient