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Business Finance Healthcare Finance: An Introduction to Accounting and Financial Management

a. Adequate information: Particular $ Amount Revenue (10,000 Patients) $ 400,000 Wages and Benefits $ 220,000 Rent $ 5,000 Depreciation $ 30,000 Utilities $ 2,500 Medical Supplies $ 50,000 Administrative Supplies $ 10,000 To construct: Profit and Loss statement for the clinic. Introduction: Profit and Loss statement refers to that statement which contains the net period income or loss of an individual or a company. It also contains the expenses for the given period. Profit and Loss statement for the clinic is as follows: Profit And Loss Statement S. No. Particular $ Amount Revenue $ 400,000 Cost of Goods Sold Wages And Benefits $ 220,000 Medical Supplies $ 50,000 1 Gross Margin $ 130,000 Operating Expenses Rent $ 5,000 Depreciation $ 30,000 Utilities $ 2,500 Administration Supplies $ 10,000 2 Profit Before Tax $ 82,500 Tax @ 30% $ 24,750 3 Profit After Tax $ 57,750 b. To find: Visits required to break-even. Introduction: Break-even point is that value of variable, in this case, ‘visits’, at which the profit earned after tax is zero. Break-even visits are 7,574. Since all the costs are fixed costs except supplies,their value per visit is not required to be calculated, for supplies, per visit costs are as follow: Per visit cost of medical supplies = 50 , 000 10 , 000 = 5 Dollars Per visit cost of administration supplies = 10 , 000 10 , 000 = 1 Dollar Revenue per visit = 400 , 000 10 , 000 = 40 Dollars Total cost other than supplies = 220 , 000 + 5 , 000 + 30 , 000 + 2 , 500 = 2 , 57 , 500 Dollars Let break-even visits be x ( 40 x − 257 , 500 − 5 x − x ) − .30 ( 40 x − 257 , 500 − 5 x − x ) = 0 34 x − 257 , 500 − 10.2 x + 77250 = 0 x = 180 , 250 23.8 = 7 , 574 Visits cannot be in fraction, so are rounded up. c) To find: Visits required to get a profit of $ 100,000 after tax Introduction: Desired profit can be achieved by considering break-even point as calculated in sub-part (b) and considering the base value as 100,000 instead of 0. To earn after tax profit of 100,000, visits required are 11,776. Since all the costs are fixed costs except supplies their value per visit is not required to be calculated, for supplies, per visit costs are as follow: Per visit cost of medical supplies = 50 , 000 10 , 000 = 5 Dollars Per visit cost of administration supplies = 10 , 000 10 , 000 = 1 Dollar Revenue per visit = 400 , 000 10 , 000 = 40 Dollars Total cost other than supplies = 220 , 000 + 5 , 000 + 30 , 000 + 2 , 500 = 2 , 57 , 500 Dollars Let break-even visits be x ( 40 x − 257 , 500 − 5 x − x ) − .30 ( 40 x − 257 , 500 − 5 x − x ) = 100 , 000 34 x − 257 , 500 − 10.2 x + 77250 = 100 , 000 x = 280 , 250 23.8 = 11 , 776 Visits cannot be in fraction, so are rounded up.

a. Adequate information: Particular $ Amount Revenue (10,000 Patients) $ 400,000 Wages and Benefits $ 220,000 Rent $ 5,000 Depreciation $ 30,000 Utilities $ 2,500 Medical Supplies $ 50,000 Administrative Supplies $ 10,000 To construct: Profit and Loss statement for the clinic. Introduction: Profit and Loss statement refers to that statement which contains the net period income or loss of an individual or a company. It also contains the expenses for the given period. Profit and Loss statement for the clinic is as follows: Profit And Loss Statement S. No. Particular $ Amount Revenue $ 400,000 Cost of Goods Sold Wages And Benefits $ 220,000 Medical Supplies $ 50,000 1 Gross Margin $ 130,000 Operating Expenses Rent $ 5,000 Depreciation $ 30,000 Utilities $ 2,500 Administration Supplies $ 10,000 2 Profit Before Tax $ 82,500 Tax @ 30% $ 24,750 3 Profit After Tax $ 57,750 b. To find: Visits required to break-even. Introduction: Break-even point is that value of variable, in this case, ‘visits’, at which the profit earned after tax is zero. Break-even visits are 7,574. Since all the costs are fixed costs except supplies,their value per visit is not required to be calculated, for supplies, per visit costs are as follow: Per visit cost of medical supplies = 50 , 000 10 , 000 = 5 Dollars Per visit cost of administration supplies = 10 , 000 10 , 000 = 1 Dollar Revenue per visit = 400 , 000 10 , 000 = 40 Dollars Total cost other than supplies = 220 , 000 + 5 , 000 + 30 , 000 + 2 , 500 = 2 , 57 , 500 Dollars Let break-even visits be x ( 40 x − 257 , 500 − 5 x − x ) − .30 ( 40 x − 257 , 500 − 5 x − x ) = 0 34 x − 257 , 500 − 10.2 x + 77250 = 0 x = 180 , 250 23.8 = 7 , 574 Visits cannot be in fraction, so are rounded up. c) To find: Visits required to get a profit of $ 100,000 after tax Introduction: Desired profit can be achieved by considering break-even point as calculated in sub-part (b) and considering the base value as 100,000 instead of 0. To earn after tax profit of 100,000, visits required are 11,776. Since all the costs are fixed costs except supplies their value per visit is not required to be calculated, for supplies, per visit costs are as follow: Per visit cost of medical supplies = 50 , 000 10 , 000 = 5 Dollars Per visit cost of administration supplies = 10 , 000 10 , 000 = 1 Dollar Revenue per visit = 400 , 000 10 , 000 = 40 Dollars Total cost other than supplies = 220 , 000 + 5 , 000 + 30 , 000 + 2 , 500 = 2 , 57 , 500 Dollars Let break-even visits be x ( 40 x − 257 , 500 − 5 x − x ) − .30 ( 40 x − 257 , 500 − 5 x − x ) = 100 , 000 34 x − 257 , 500 − 10.2 x + 77250 = 100 , 000 x = 280 , 250 23.8 = 11 , 776 Visits cannot be in fraction, so are rounded up.

Solution Summary: The author explains the definition of a profit and loss statement for the clinic.

Healthcare Finance: An Introduction to Accounting and Financial Management

Healthcare Finance: An Introduction to Accounting and Financial Management

6th Edition

ISBN: 9781567937411

Author: Louis C. Gapenski, Kristin L. Reiter

Publisher: Health Administration Press

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Healthcare Finance: An Introduction to Accounting and Financial Management

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