Question

Does this look right so far? How do I find the contribution margin and budgeted profits?

1 CHAPTER 8: FINANCIAL PLANNING & BUDGETING 2 Homework 3.4, Chapter 8 3 4 Chelsea Clinic projected the following budget information for 2021: 5 6 TotalFFS Visits Volume 70,000 visits 7 Payer Mix 8 Blue Cross 60% 9 Highmark 40% 10 Reimbursement Rates: 11 Blue Cross $45 per visit 12 Highmark $50 per visit 13 Variable Costs 14 Resource Inputs: 15 Labor 0.7 total hours 16 Supplies 1.3 total units 17 Resource Input Prices: 18 Labor $22.00 per hour 19 Supplies $1.25 per unit 20 Fixed Costs $800,000 21 22 Using Exhibit 8.3 as a guide (excluding the capitated numbers since payers in this 23 homework problem are allFFS) construct Chelsea Clinic's operating budget for 2021, 24 including projections for volume, revenues, costs, and a P&L statement 25 26 27 Volume 28 Blue Cross 42000 29 High Mark 28000 30 Total Bugeted Visits 70000 31 32 33 Revenues 34 Blue Cross $1,890,000 35 High Mark $1,400,000 36 Total Budgeted Revenues $3,290,000 37 38 39 Costs 40 Variable Costs 41 Labor $15.40 42 Supplies $1.63 43 Total Variable Costs $17.03 44 Variable Cost Per Visit $0.00024 45 Fixed Costs $800,000 46 Total Budgeted Costs $800,017.03 47 48 $3,290,000 $3,290,000 49 Profit and Loss 50 Revenues 51 FFS 52 Total Revenue 53 Costs 54 Variable 55 Contribution margin 56 Fixed Costs 57 Budgeted Profits 58 59 $17.03 $800,000

Answer 1

	Chelsea Clinic
	Operating Budget for 2021.
	Particulars	Blue Cross	High Mark	Total
	Payer Mix	60%	40%	100%
a	No of Budgeted Visits at Payer Mix ratio	42,000	28,000	70,000
b	Revenue Per visit	$                         45.00	$                   50.00
c	Budgeted Annual Revenue (a*b)	$                 1,890,000	$            1,400,000	$           3,290,000
	Variable Costs
d	Labor hours per visit	0.7	0.70
e	Total Labor Hrs Budgeted =a*d=	29,400	19,600
f	Labor cost / Hr	$                         22.00	$                   22.00
g	Total Labor cost =e*f=	$               646,800.00	$          431,200.00	$           1,078,000
i	Supplies required per unit	1.3	1.30
j	Total Supplies Budgeted=a*h=	54,600	36,400
k	Supplies cost per unit	$                           1.25	$                      1.25
l	Total Supplies Cost =g*h=	$                 68,250.00	$            45,500.00	$        113,750.00
m	Total Variable cost =g+l	$               715,050.00	$          476,700.00	$     1,191,750.00
n	Contribution Margin =a-m	$            1,174,950.00	$          923,300.00	$     2,098,250.00
o	Fixed Cost			$        800,000.00
p	Operating Income/(Loss)=n-o=			$     1,298,250.00