Question

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.

The following information has been gathered about the practice:

ENT Clinic, Miles Private Hospital Balance Sheet As at 31 December 2020 Assets Cash Accounts Receivable ENT Equipment Less: Accumulated Depreciation Total Assets $AUD 56,500 48,895 1,560,000 ( 190,000) $1,475,395 Liabilities & Shareholder Equity Accounts Payable Bank Loan Retained Earnings Total Liabilities & Shareholders' Equity 56,400 600,000 818,995 $1,475,395

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.

Q1:

Answer 1

Disclaimer: Since excel file cannot be uploaded so, it has been copied from excel working. If anyone requires excel file then comment to get the attachment

Working notes: cAlculation of hours required and total number of patients

Calculation of total number of patients and hours required Month Dr janet Dr Samantha Dr john Total patients 30 min appointment Hours required Surgeries Hours required Jan-21 90 80 95 265 198.75 99.375 66.25 66.25 Feb-21 80 80 95 255 191.25 95.625 63.75 63.75 Mar-21 80 80 95 255 191.25 95.625 63.75 63.75 Apr-21 80 80 95 255 191.25 95.625 63.75 63.75 May-21 70 80 95 245 183.75 91.875 61.25 61.25 Jun-21 70 80 95 245 183.75 91.875 61.25 61.25 Jul-21 50 80 95 225 168.75 84.375 56.25 56.25 Aug-21 50 80 95 225 168.75 84.375 56.25 56.25 Sep-21 40 80 95 215 161.25 80.625 53.75 53.75 Oct-21 40 80 95 215 161.25 80.625 53.75 53.75 Nov-21 40 80 95 215 161.25 80.625 53.75 53.75 Dec-21 50 80 95 168.75 84.375 56.25 56.25 Jan-22 40 80 95 215 161.25 80.625 53.75 53.75 Feb-22 40 80 95 215 161.25 80.625 53.75 53.75 225

1. Calculation of monthly revenue budget

Received in same Received in next Month Total patients 30 min appointment Revenue @260 Surgeries Revenue @400 Total revenue month month Jan-21 265 198.75 51675 66.25 26500 78175 46905 Feb-21 255 191.25 49725 63.75 25500 75225 45135 31270 Mar-21 255 191.25 49725 63.75 25500 75225 45135 30090 Apr-21 255 191.25 49725 63.75 25500 75225 45135 30090 May-21 245 183.75 47775 61.25 24500 72275 43365 30090 Jun-21 245 183.75 47775 61.25 24500 72275 43365 28910 Jul-21 225 168.75 43875 56.25 22500 66375 39825 28910 Aug-21 225 168.75 43875 56.25 22500 66375 39825 26550 Sep-21 215 161.25 41925 53.75 21500 63425 38055 26550 Oct-21 215 161.25 41925 53.75 21500 63425 38055 25370 Nov-21 215 161.25 41925 53.75 21500 63425 38055 25370 Dec-21 225 168.75 43875 56.25 22500 66375 39825 25370 Jan-22 215 161.25 41925 53.75 21500 63425 38055 26550 Feb-22 215 161.25 41925 53.75 21500 63425 38055 25370

2. Calculation of labour budget

note: Assumed 52 weeks per year

Particulars Annual salary of 1 employee on cost Leave allownace Idle time allowance Total salary per employee NO of employee Total salary No of appointment budgeted for year Expected hours Labour cost per hour Labour cost per 30 min appointment Labour cost per hour appointment Ent Specialist 3,00,000.00 90,000.00 60,000.00 20,800.00 4,70,800.00 3.00 14,12,400.00 2,840.00 1,775.00 795.72 397.86 795.72 Administrartive assistant 70,000.00 21,000.00 14,000.00 4,853.33 1,09,853.33 2.00 2,19,706.67 2,840.00 1,775.00 123.78 61.89 123.78

3. Preparation of operational expense budget

Note calculation of total slary per month =(1412400+219706)/12 =136009)

Insurance Telephone 120 833 General office 200 Surgical supplies 200 Utiliies 1000 1000 1000 Total 233 141195.7 233 141195.7 833 120 120 200 200 833 233 141195.7 1000 120 200 Month Salary per month Rent Jan-21 136009 Feb-21 136009 Mar-21 136009 Apr-21 136009 May-21 136009 Jun-21 136009 Jul-21 136009 Aug-21 136009 Sep-21 136009 Oct-21 136009 Nov-21 136009 Dec-21 136009 1000 200 200 200 200 200 833 833 833 120 120 1000 Repairs 2600 2600 2600 2600 2600 2600 2600 2600 2600 2600 2600 2600 120 833 200 1000 1000 1000 200 120 120 200 200 200 200 200 200 200 200 833 833 233 141195.7 233 141195.7 233 141195.7 233 141195.7 233 141195.7 233 141195.7 233 141195.7 233 141195.7 233 141195.7 200 1000 120 833 200 120 833 200 1000 1000 120 833 200

1. Calculation of Income statement for the year ending 31st dec 2021

Total income Less: Total operating expense less: Depreciation less: bank interest Expected loss 8,37,800 16,94,348 95,000 48,000 -9,99,548

Since, it has not been mentioned that how many answers should be given, so only first four answers are given.

Preparation of cash budget

Note: Areears of receivable and payables in balance sheet is paid and received in jan 2021

Dec-21 Apr-21 -85085 May-21 -158304 43365 Nov-21 -620606 -699423 38055 Jan-21 56500 46905 48895 40803 300 Feb-21 50427 45135 31270 136009 1000 45135 30090 Mar-21 -15410 45135 30090 136009 1000 108 833 Jun-21 -227091 43365 28910 136009 1000 108 Jul-21 -299716 39825 28910 136009 1000 252 Aug-21 -379425 39825 26550 136009 1000 Sep-21 -455292 38055 26550 136009 1000 30090 136009 1000 Oct-21 -535587 38055 25370 136009 1000 252 136009 1000 252 25370 136009 1000 39825 25370 136009 1000 108 Particulars Opening cash Add: revenue of same month Revenue of last month Salary rent Utilities Insurance Telephone General office Surgical supplies Repairs Arrers of last month paid Interest Closing cash 108 833 833 833 833 833 833 833 833 833 249.9 60 60 200 200 200 200 833 200 200 5460 490 200 200 200 200 200 200 2340 210 200 200 200 200 2340 210 200 200 5460 490 200 2340 210 200 5460 200 200 2340 210 490 56400 4000 4000 4000 4000 -15410 4000 -85085 4000 -227091 4000 -299716 4000 -455292 4000 -535587 4000 -620606 4000 -699423 4000 -779128 50427 -158304 -379425

Balance sheet budgeted