Reference no: EM133180816

Health Services Resource Management

Problem 1
The following items relate to your hospital for the financial years 2019 and 2020:

	2020 ($)	2019 ($)
Accumulated depreciation on PPE	20,000,000	12,000,000
Accounting fees	20,000	7,500
Audit fees	6,000	5,500
Bad and doubtful debts	200	100
Capital purpose income	600,000	400,000
Car park revenue	50,000	45,000
Cash & cash equivalents	5,000,000	2,000,000
Depreciation& amortisation	800,000	560,000
Domestic services	150,000	100,000
Drug expenses	20,000	55,000
Food expenses	700,000	600,000
Fuel, light, power and water	200,000	110,000
Government grants	4,000,000	2,000,000
Insurance costs	8,000	7,500
Interest and dividends	80,000	30,000
Inventories (drugs)	4,000,000	3,250,000
Lease expenses	150,000	99,000
Long-term loans	20,000,000	10,000,000
Long-term receivables	60,000,000	55,550,000
Maintenance contracts	35,000	22,500
Medical expenses	90,000	88,000
Motor vehicle expenses	55,000	38,000
Motor vehicles	400,000	300,000
Non-salary labour costs	40,000	35,000
Other administrative expenses	428,000	750,000
Other current assets	1,000,000	$578,000
Other current labilities	3,000,000	1,500,000
Other revenue	850,000	500,000
Patient fees revenue	5,500,000	4,280,000
Patient transport expenses	1,000	800
Private practice fee revenue	300,000	450,000
Property, Plant & Equipment (PPE)	100,000,000	78,000,000
Repairs and maintenance	65,250	22,500
Salary and wages	8,000,000	6,028,000
Short-term payables	600,000	200,000
Short-term receivables	3,500,000	1,520,000
Short term staff benefits	2,500,000	1,850,000
State government grants	100,000	66,800
Superannuation	400,000	389,000
Total equity Workcover insurance	127,800,000 105,000	115,648,000 88,200

Cash flow information

	2020 ($)	2019 ($)
Capital Grants from Government	120,000	200,000
Cash at beginning of period	1,127,000	(253,000)
Cash at end of period Donations and Bequests Received	5,000,000 25,000	2,000,000 18,000
Employee Expenses Paid	6,000,000	4,500,000
GST Received from ATO	5,000	2,000
Interest Received	95,000	55,000
Non-salary Labour Costs	22,000	12,000
Operating Grants from Government	4,000,000	2,500,000
Other Capital Receipts	50,000	10,000
Other Receipts	800,000	560,000
Patient and Resident Fees Received	8,000,000	6,000,000
Payments for Non-Financial Assets	300,000	60,000
Payments for Supplies & Consumables	3,000,000	2,800,000
Proceeds from sale of Non-Financial Assets	100,000	280,000

Required:
Question 1. Prepare a balance sheet, income statement and cashflow statement for 2019 and 2020 (arrange the statements like the financial statements of Barwon Health
Question 2. Provide a brief summary of your hospitals overall financial performance. In your summary, discuss whether it is profitable and financially sustainable, and liquid (i.e. does it have enough cash inflows to cover cash outflows and debts as they fall due?).

Problem 2

The following transactions relate to your hospital:
• May 1: Paid rent for the month of May $4,000.
• May 1: Paid insurance for June, July and August, $3,000.
• May 2: Patients received health services of $20,000, paid cash on same day.
• May 6: Patients received health services of $80,000 on terms of net 30 days.
• May 8: Purchased medical supplies to be used in Mayand paid on the same day,$20,000.
• May 15: Patients paid $5,000 for health services received on May 6.
• May 30:Paid $20,000 for salaries for work in May.
• June 1:Paid rent for the months of June and July$8,000.
• June 1: Patients paid $15,000 for health services received on May 6.
• June 2: Purchasedmedical supplies for $100,000 on terms of net 30 days. $50,000 of the supplies will be used in June, and the other $50,000 in July.
• June 5: Patients paid $60,000 for health services received on May 6.
• June 10: Patients received health services of $100,000 on terms of net 30 days.
• June 15: Phone bill received $500 for telephone services in May.
• June 30: Paid $25,000 for salaries for work done in June.
• June 30: Patients paid $30,000 for health services received on June 10.
• June 30: Paid phone bill received on June 15.

Required:
Question 1. Calculate the profit/loss for each month on a cash accounting and accrual accounting basis (prepare a separate profit and loss statement for each month and show your calculations).
Question 2. Which month was the most profitable for your hospital? Explain your answer by specifically referring to the method (cash or accrual) you would adopt to evaluate the profitable month.
Question 3. Calculate your hospital's profit or loss for the two months ending June on both a cash accounting and accrual accounting basis. If you get the same answer for both methods explain why this is the case. If you get a different answer for the cash and accrual methods, explain the causes of it.
Question 4. Why are the profit/loss figures different under each method? Which method would you prefer to use for planning and decision-making in your hospital and why?

Problem 3

You forecasted the following consultations (in units) for your medical clinic as below:

December 2019 January 2020 February 2020 March 2020

15,000 10,000 12,000 18,000

• The average fee for medical consultations is $40.
• 80% of consultation fees are collected in the month they occur, 10% in the following month and 10% in the second month following the consultation.
• Fixed expenses for your medical clinic are $45,000 per quarter and this includes $5,000 depreciation expense.
• Variable consultation expenses are $10 per consultation.
• Your medical clinic has a bank loan incurring interest of $10,000 per quarter and must be paid at the end of each quarter.
• All other expenses are paid in the quarter in which they are incurred.
• Monthly staff salaries are $10,000 and are paid in the month they are due.
• As at 1 January 2020, there was $100,000 in your clinic's bank account.

Required
Question 1. Prepare a consultations budget for the quarter (i.e. show the number of consultations and the expected revenue for these months).
Question 2. Prepare a cash collections schedule for the quarter.
Question 3. Prepare a cash budget for the quarter. Will your clinic need to borrow money during this period? If so, how much and in which month?
Question 4. Prepare a budgeted profit and loss statement for the quarter.

Problem 4

You are considering setting up a new paediatric departmentin your hospital, focussing on giving adviceto children about their diets. If you do set up this department, you will give each child patient a Disney diet diary costing $10 a diary, and a fruit soft toy costing $2 each. Each child will have yearly consultations and you will charge $30 for each consultation. You will need to hire a paediatrician who will be paid $4,000 a month. Other fixed costs for the department will be $2,000 per month.You budget20,000 patients for this year and set your budget based on this number of patients.

After the end of the year, you generated the following actual results:

	Actual Results (10,000 patients)
Revenue Variable costs: Disney diary Fruit soft toy   Total variable costs:   Fixed costs: Paediatrician Other fixed costs     Total fixed costs  Operating profit:	$350,000   $140,000 $30,000 $170,000     $6,000 $8,000 $14,000 $166,000

Required:

Question 1. Prepare a budget variance report and identify the main favourable and unfavourable variances.
Question 2. What could be the causes of these variances, and how will these possible causes influence your budget planning for next year?