Chapter 8: Financia l Planning and Budgeting elsea Clinic projected the followin
ID: 2615472 • Letter: C
Question
Chapter 8: Financia l Planning and Budgeting elsea Clinic projected the following budget information for 2015: Che 8.6 Total FFS Visit Volume Payer Mix: 90,000 visits Blue Cross 40% 60% Highmark Reimbursement Rates: Blue Cross Highmark $25 per visit $20 per visit Variable Costs Resource Inputs: Labor 48,000 total hours 100,000 total units Supplies Resource Input Prices: Labor Supplies $25.00 per hour $1.50 per unit $500,000 Fixed Costs (overhead, plant, and equipment) a. Construct Chelsea Clinic's operating budget for 2015 b. Discuss how cach key budget assumption might result in a budget variance, and name the variance that would be used to examine rrsults assnciated with each assumption.Explanation / Answer
Chelsea Clinic
Operating Budget for the year 2015
Revenue
Blue Cross
900000
Highmark
1080000
1980000
Expenses
Variable Costs
- Labour
1200000
- Supplies
150000
Fixed Costs
- Overhead (Plant and Equipment)
500000
1850000
Net Profit
130000
Working Notes:
Number of Payers
Rate
Total
Service Revenue
- Blue Cross (40%)
36000
25
900000
- Highmark (60%)
54000
20
1080000
1980000
Qty.
Rate
Total
Variable Expenses
- Labour
48000
25
1200000
- Supplies
100000
1.5
150000
1350000
Chelsea Clinic
Operating Budget for the year 2015
Revenue
Blue Cross
900000
Highmark
1080000
1980000
Expenses
Variable Costs
- Labour
1200000
- Supplies
150000
Fixed Costs
- Overhead (Plant and Equipment)
500000
1850000
Net Profit
130000
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