The budget anticipated 30,000 inpatient days this year at an average of $650 revenue
• Inpatient expenses were budgeted at $600 per patient day.
• The budget anticipated 10,000 outpatient visitsthis year at an average of$400 revenue
• Outpatient expenses were budgeted at $380 per visit.
As to the actual results:
• Assume that only 27,000, or 90%, of the inpatient days are going to actually be
achieved for the year.
• The average revenue of$650 per day willbe achieved for these 270,000 inpatient days.
• The outpatient visitswill actually amount to 110%, or 11,000 for the year.
• The average revenue of $400 per visitwill be achieved for these 11,000 visits.
• Further assume that, due to the heroic efforts of the Chief Financial Officer, the actual
inpatient expenses willamount to $11,600,000 and the actual outpatient expenses
willamount to $4,000,000.
1. Set up three worksheets that follow the format of those in Example 15A.However, in
each of your worksheets make two lines for revenue; label one as Revenue-Inpatient
and the other Revenue-Outpatient. Add a Revenue Subtotal line. Likewise, make two
lines for expense; label one as Expense-Inpatient and the other Expense-Outpatient.
Add an Expense Subtotal line.
2. Using the new assumptions, complete the first worksheet for “AsBudgeted.”
3. Using the new assumptions, complete the second worksheet for “Actual.”
4. Using the new assumptions, complete the third worksheet for “Static Budget Variance.”
ifosignment Exercise 15-1: Budgeting
Select an organization; either Metropolis Health Systemfrom the Chapter 25 Case Study or
one of the organizations presented in the Mini-Case Studies in Chapters 26-28.
l. Using the organization selected, create a budget for the next fiscal year. Set out the
details of all assumptions you needed in order to build this budget.
2. Use the “Checklist for Building a Budget” (Exhibit 15-2) and critique your own
~signment Exercise 15-2: Budgeting
Find an existing budget from a published source. Detail should be extensive enough to
present a challenge.
Chapter 15 391
1. Using the existing budget, create a new budget for the next fiscalyear. Set out the details
of all the assumptions you needed in order to build this budget.
2. Use the “Checklist for Building a Budget” (Exhibit 15-2) and critique your own effort.
3. Use the “Checklist for Reviewing a Budget” (Exhibit 15-3) and critique the existing
VAssignment Exercise 15-3: Transactions outside the Operating Budget
ReviewFigure 15-2and the accompanying text.
Metropolis Health System has received a wellness grant from the charitable arm of an
area electronics company. The grant will run for twenty-four months, beginning at the first
of the next fiscal year. Two therapists and two registered nurses will each be spending half
of their time working on the wellness grant. All four individuals are full-time employees of
MHS. The electronics company has only recently begun to operate the charitable organization
that awarded the grant. While they have gained all the legal approvals necessary, they
have not yet provided the manuals and instructions for grant transactions that MHSusually
receives when grants are awarded. Consequently, guidance about separate accounting is
not yet forthcoming from the grantor.
How would you handle this issue on the MHS operating budget for next year?
0ssignment Exercise 15-4: Identified versus Allocated Costs in Budgeting
ReviewFigure 15-3and the accompanying text.
Metropolis Health System is preparing for a significant upgrade in both hardware and
software for its information systems.As part of the project, the Chief of Information Operations
(CIO) has indicated that the Information Systems (IS) department can change the
format of the MHS operating budgets and related reports before the operating budget is
constructed for the coming fiscal year.The Chief Financial Officer (CFO) has long wanted
to modify what costs are identified and what costs are allocated (along with the method of
allocation). This is a golden opportunity to do so. To gain ammunition for the change, the
CFO is preparing to conduct a survey.The surveywill obtain a variety of suggestions for potential
changes in allocation methods for the new operating budget report formats. You
have been selected as one of the employees who willbe surveyed.
Youmay choose your role for this assignment, as follows:
Refer to the “MHS Executive-Level Organization Chart” (Figure 25-2 in the MHS Case
Study). (1) Either (a) choose any type of patient service that would be under the direction