Adjusting the Budget Exercise
Review the information presented below in the Sample Operating Budget and adjust this budget according to the following:
You have just learned that inpatient charges will probably be 3% higher than projected and that outpatient charges are expected to increase by 8%, and that your research grant support will be reduced by half.
The continuing education conference projected to net $3,200 has been canceled.
Salary expenses will likely be 2% higher than originally anticipated.
You are required to show a projected net profit of at least 50% of total revenue. If your revised budget generates less than this level of net profit or surplus, indicate where you can probably cut expenses to meet the target and explain why the expenses you have chosen to cut are your best choices.
Sample Operating Budget—Department of Physical Therapy
(July 1, 20n1, through June 30, 20n2)
Revenue and Income
A. Inpatient Charges $550,000
B. Outpatient Charges $310,000
C. Research Grant Support $29,000
D. Continuing Education Conference $3,200
E. Supplies and Equipment Sales $11,500
Total Revenue $903,700
Direct Expenses
A. Salaries $260,000
B. Consultant $2,500
C. Honorarium $1,500
D. Minor Equipment $6,000
E. Equipment Rental $2,000
F. Travel $2,500
G. Telephone $5,000
H. Supplies $6,000
I. Postage $350
J. Copy Machine Rental $11,000
K. Advertisement $1,500
L. Dues $800
M. Books $350
N. Equipment Maintenance and Service Contracts $2,000
Total Direct Expenses $301,500
Indirect Expenses
A. Employee Benefits (23%) $59,800
B. Administration $23,000
C. Equipment Depreciation $7,200
D. Physical Plant Operation $39,000
E. Maintenance and Repairs $2,000
F. Building Depreciation $6,000
G. Laundry/Linen $2,500
H. Housekeeping $4,900
Total Indirect Expenses $144,400
Total Expenses $445,900
Net Profit or Loss $457,800

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