problem: The hospital expects to employ workers in the following departments:
|
|
Radiology
|
Nursing
|
Administration
|
Total
|
|
Managers
|
$100,000
|
$200,000
|
$200,000
|
$500,000
|
|
Staff
|
1,900,000
|
4,200,000
|
300,000
|
6,400,000
|
|
Total
|
$2,000,000
|
$4,400,000
|
$500,000
|
$6,900,000
|
Supplies are expected to be purchased through-out the year for the departments, as follows:
|
|
Total
|
|
Radiology
|
$360,000
|
|
Nursing
|
160,000
|
|
Administration
|
160,000
|
|
Total
|
$540,000
|
Suppose that all supply use varies with the number of patients.
Denison Hospital currently pays charge on its buildings & machine of $300,000 per year. Rent is expected to be unchanged for next year. The rent is paid dollar 75,000 each quarter.
To better serve its patients, Denison would like to buy $500,000 of new oncology machine at the start of next year. It would be paid for immediately upon buy. The machine has a five-year life and would be expected to be used up evenly over that lifetime. Although the capital budget would normally include justification for why the machine is needed, it is sufficient for our purposes to know that the capital budget for Denison is dollar 500,000 & the machine to be purchased has a five (5) year useful life. It will have no price left at the end of the five (5) years. Denison charges the cost of its capital gaining on straight line depreciation basis. That means that the cost is spread out over the useful life, with an equal share being charged as a cost, called depreciation expense, every year.
Compute an expense budget on an accrual basis for the coming year. The expense budget does not need detailed information by program, but should show each type of expense such as salaries & supplies. Be sure to consider the impact of capital gaining on the expense budget.