Ratio Analysis – Expense Forecasting
| W8A5 Estimated Expenses | |||||
| Refer to the Healthcare Budget Guide for directions on completing this Expense Forecasting scenario | |||||
| Expense Forecasting | |||||
| Based on the information provided, prepare an expense forecast for 20X1 using the template below: | |||||
| Spending during January- June 20X1 (6 months) | |||||
| · Fixed expense items: $210,000 | |||||
| · Variable expense items: $1,200,000 | |||||
| · One time expense: $50,000 of fixed expense money was spent on preparing for a Joint Commission survey | |||||
| Procedures preformed during January- June 20X1 (6 months) | |||||
| · Your department has performed 20,000 procedures during the first six months | |||||
| On November 1,20X1, two new procedure technicians will begin work. The salary and fringe benefit costs for each is: | $ 96,000.00 | yearly | |||
| Description | Fixed | Variable | TOTAL | ||
| Year to Date Expense | $210,000 | $1,200,000 | $1,410,000 | ||
| Adjustments | |||||
| Add back “One Time” credits | |||||
| Deduct “one Time” expenses | $50,000 | $ 50,000.00 | |||
| Adjusted total for year to date expense/ volume | $160,000 | $1,200,000 | $1,360,000 | ||
| Annualization | |||||
| Divide by months (fixed) | $26,666.67 | ||||
| Multiple by months (fixed) | $320,000.00 | ||||
| Divide by volume | 60 | ||||
| Multiply by volume | 24,000,000 | ||||
| Annualized Amounts | $320,000.00 | $ 24,000,000.00 | $24,320,000.00 | ||
| Adjustments | |||||
| Add back “One Time” expenses | $50,000 | ||||
| Deduct “One Time” credits | |||||
| Expense two new technicians | $96,000.00 | ||||
| Expense Forecast as of 12/31/X1 | $466,000.00 | $ 24,000,000.00 | $24,466,000.00 | ||
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Question 
Ratio Analysis – Expense Forecasting
W8A5 Ratio Analysis
Your personal decisions regarding purchases are likely made, in no small part, based on your financial position. You will likely consult your bank statements and checkbook before buying. But the extent that you will go beyond current resources—including loans and financing—will depend on factors such as need for the good or service and potential it has for returning value. Similarly, leaders must juggle need, financial position, and potential for return when making expenditure decisions.
For this Assignment, you consider analysis tools such as expense forecasting, break-even, cost-benefit, marginal profit and loss and cost-effectiveness that can help determine the financial and organizational impact of proposed expenditures and investments.
Ratio Analysis – Expense Forecasting
Resources
Be sure to review the Learning Resources before completing this activity.
Click the weekly resources link to access the resources.
WEEKLY RESOURCES
To Prepare
Complete the required reading in the Learning Resources.
Reflect on how these might be applied to your project.
The Assignment
Conduct a financial analysis using the three scenarios provided in the Excel Assignment Workbook. These are not based on your project but will help you learn the process.
Complete the following:
Ratio Analyses Worksheets:
Open your Excel Assignment Workbook. This assignment will be completed on 3 separate tabs named:
W8A5a Expense Forecasting
W8A5b Breakeven Analysis
W8A5c Marginal Profit and Loss
Using the Healthcare Budget Request Guide for guidance, complete the three scenarios: expense forecasting, break-even, marginal profit and loss for the scenarios provided.
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