You are a management accountant working in the Finance team at Miles private hospital. You have been assigned to assist the ENT (Ear, Nose and Throat) specialists¹ that operate out of rented premises on level 6 at the hospital. You are to prepare their master budget for 2021 and make recommendations on how they could improve their operations.

There are three (3) ENT Specialists in the practice; Dr Janet Courtney, Dr Samantha Downer and Dr John Malouf. They are supported by two (2) administrative staff; Daniel Hall and Julie Sky.

¹ This is a fictional hospital and clinic based on a real case shared by SCU Alumni, Nicholas Hoffman in the Industry Conversations Podcast Episode #2. Please listen to this podcast as background to this assignment. It is accessible via the BlackBoard Learning site in the “Career & Employability“ folder.

The following information has been gathered about the practice:

ENT Equipment: Depreciation on the ENT equipment totals $95,000 per year. Depreciation is recorded monthly.

Bank Loan: The business has an interest only loan and the interest is paid monthly. The principle can be repaid at any time. The interest rate payable on the loan is 8% per annum.

Expected patient visits for each of the ENT specialists for 2021 are indicated in the table below. 75% of the visits are expected to be half-hour appointments and the remainder will be one hour surgeries:

The average fees received for the two (2) different types of appointments are $260 for half an hour (30 minutes) appointments and $400 for one hour surgeries (60 minutes).

Cash collections: Sixty per cent (60%) of the revenue received for each month’s ENT’s services and surgeries is collected during the month when the services and surgeries are rendered and the remainder (40%) is collected the following month.

The following table outlines the operating costs for the year.

Payments: It is estimated that 30% of all operating expenses will be paid in the month they are due and the remaining 70% will be paid in the following month.

Salaries: The ENT specialists and administrative staff all receive an annual salary that is paid monthly. It is estimated that their on-costs² are 30% of their annual salary. They work 37.5 hours per week.

Each employee’s allowance for annual leave, public holidays and sick leave amounts to 8 weeks per year. They are also given an allowance for non-billable time of 2 hours per week which includes professional development, department meetings and idle time.

Ignore GST and Income Tax.

² On costs are labour costs in addition to salaries and wage. They include payroll tax, workers' compensation and other liability insurance, the cost of subsidized services to employees, training costs etc.

ASSIGNMENT REQUIREMENTS:

                                                             PART ONE:                                                             

Budget Schedules & Expected Outcomes for 2021

(15 marks/30 marks, weighted 50% of assignment total)

Using the information provided, prepare the following operating and financial budgets for the twelve-month period from January 2021 to December 2021.

Operating Budgets:

1. Monthly Revenue Budget
2. Labour Budget (including labour cost per appointment type)
3. Monthly Operating Expense Budget Financial Budgets:
4. Budgeted Income Statement for the year ended 31 December 2021
5. Monthly Cash flow Budget for the year ended 31 December 2021
6. Budgeted Balance Sheet for the year ended 31 December 2021

Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document). The first worksheet should contain your raw/input data and assumptions from this assignment overview sheet. All future worksheets should be linked to this data. Show all calculations and use Excel functions where possible. While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.

                                                             PART TWO:                                                            

Analysis & Report to the Specialists of the ENT Clinic (15 marks/30 marks, 50% of assignment total)

Write a report (Maximum 1,500 words, 10% (+/-) will be accepted with no penalty) for the three specialists at ENT Clinic. The report should include:

• An overview of the expected results for the ENT clinic for the 2021 year including total revenue, operating expenses and expected cash position;
• a cost-volume-profit (CVP) analysis to indicate the breakeven point (in patients and revenue dollars) and provide recommendations regarding cost control strategies and how to improve the current margin of safety,
• an analysis of the business operations (i.e. current incomes and expenses) and recommendations regarding how to improve the profitability of the ENT clinic. Use industry data (e.g. market rate for salaries) to support any recommendations for
• Explain how the budgeting process can assist the ENT specialists to articulate decisions about the use of resources and how the budget can be used throughout the year to analyse variances and lead to continuous improvement within the
• Use visual aids such as tables and graphs to enhance your report

The report should be submitted as a WORD (not PDF) document.

As background to this assignment please listen to the Industry Podcast Episode #2 in the “Career & Employability” folder on Blackboard.