Marx Healthcare, a group practice clinic with 10 physicians, had the following income in 2017:
Revenue | $3,350,000 | |||||||
Less operating expenses: | ||||||||
Salaries | ||||||||
Physicians | $1,340,000 | |||||||
Nurses | 146,000 | |||||||
Nursing aide | 62,500 | |||||||
Receptionist | 50,000 | |||||||
Accounting services | 46,000 | |||||||
Training | 130,000 | |||||||
Supplies | 259,000 | |||||||
Phone and fax | 3,850 | |||||||
Insurance | 260,000 | |||||||
Depreciation | 230,000 | |||||||
Utilities | 18,600 | |||||||
Miscellaneous | 68,000 | |||||||
Total operating expenses | 2,613,950 | |||||||
Income before taxes | 736,050 | |||||||
Less taxes on income | 257,618 | |||||||
Net income | $478,432 |
The following changes are expected in 2018:
1. | The clinic is expecting a 2 percent decline in revenues because of increasing pressure from insurance companies. | |
2. | Physicians are planning to hire a physician assistant at a salary of $46,000 per year. | |
3. | Training costs are expected to increase by $10,000. | |
4. | Supplies are expected to increase to be 10 percent of revenue. | |
5. | Phone, fax, accounting services and insurance amounts will stay the same. | |
6. | Depreciation expense will increase by $22,000 per year, since the clinic is planning to purchase equipment for $125,000. | |
7. | Utilities and miscellaneous expenses are expected to increase by 5 percent next year. | |
8. | Taxes on income will be 35 percent. |
Prepare a budgeted income statement for Marx Healthcare for the
year 2018. (Round answers to 0 decimal places, e.g.
125.)
Effect of changes:
1)As the revenue decrease by 2% then revenue becomes
3350000-2%=3283000
2)Hence there will be increase in salary expense.
3)training costs increase by 10000 then it becomes 130000+10000=140000
4)supplies expect to increase by 10% of revenue.hence
3283000*10%=328300
5)phone fax accounting services remain same hence no change in them.
6)depreciation expense increase by 22000 hence depreciation becomes 252000
7)utilities and miscellaneous expense increase by 5% hence
86600+5%=90930.
8)taxes on income shall be 35%.
Hence income statement shall be
Revenue:3283000
Salaries consolidated:(1644500)
Training costs:(140000)
Supplies:(328300)
Phone,fax&accounting services: (39850)
Depreciation:(252000)
Utilities and misc.exp:(90930)
Income before taxes:787420
(-)taxes@35% :(275597)
Net income . :511823
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