Budgeting, Costing and Casemix Essay Example | Topics and Well Written Essays - 1250 words

Budgeting, Costing and Casemix - Essay Exampleas the NPV is less than zero so it is non advisable for the university to invest in this project. Had the NPV been greater than zero it would make thought to invest in this venture. Question Five Part (a) The state of revenues and expenses for the hospital argon as shown in the delay below taxations Direct Indirect 16 5.5 1.5 5 3.3 3.8 6 2.8 1.6 - - 4.4 - - 2.55 27 11.6 13.85 Projected Profit 1.55 Note All set in millions of dollars. Therefore the hospitals projected profit for the 2010 fiscal year is $1.55 million. Part (b) The everyocation of indirect costs to the patient services parts argon indicated in the table below along with the agreed cost drivers. Indirect Cost Cost Driver Cost (Millions of Dollars) Financial Services Patient Revenue 1.5 Maintenance space Utilisation 3.8 Housekeeping Labour Hours 1.6 Administration Salary Dollars 4.4 Personnel Salary Dollars 2.55 The breakup of the indirect costs to each department is d escribe below. Accounting Salaries divided equ in ally amongst all three departments, therefore cost to each department is 0.5 million dollars. Maintenance divided amongst all three departments establish on space utilisation (covered area), cost to each department is indicated in the table below Department Space Utilisation (square meters) Percentage of Total Space Cost (millions of dollars) go Care 199,800 66 2.525 lab 39,600 13 0.50 Radiology 61,200 20 0.774 Housekeeping divided amongst all three departments based on labor movement hours utilised, cost to each department is indicated in the table below Department Labour Hours Percentage of Total Cost (millions of dollars) Routine Care 76000 84% 1.34 Laboratory 6000 7% 0.105 Radiology 9000 10% 0.158 Administration divided amongst all three departments based on salary dollars utilised, cost to each department is indicated in the table below Salary Dollars Percentage of Total Cost (millions of dollars) Routine Care 5,709,000 56% 2 .47 Laboratory 2,035,000 20% 0.879 Radiology 2,439,000 24% 1.05 Personnel divided amongst all three departments based on salary dollars utilised, cost to each department is indicated in the table below Salary Dollars Percentage of Total Cost (millions of dollars) Routine Care 5,709,000 56% 1.40 Laboratory 2,035,000 20% 0.50 Radiology 2,439,000 24% 0.60 Part (c) The allocation method utilised is well reasoned and makes a lot of sense on paper and on ground. The accounting salaries would in principle get divided amongst all three departments equally. The maintenance costs would get divided amongst all three departments based on the floor space allocated in principle. However it must be taken in mind that the routine care department would have little equipment that would require large maintenance costs but the laboratory and the radiology department would furnish such equipment e.g. centrifuges, x-ray machines and the like. Therefore employ total space occupied alone would not really reflect the state of maintenance expenses alone because routine care would always assume more than space while laboratory and radiology would use