Reference no: EM133530814

Case Study: 13.5: IOP Boogie Clinic Forecasting Key concept: Forecasting an income statement for a proposed clinic Dr. Cheryl Jacobsen was preparing to open a beachfront medical clinic, which would provide a variety of medical services to boogie boarders, surfers, and other beachgoers, in January 2015. She planned to operate IOP Boogie Clinic Inc. as a subchapter S tax entity. Because she had recently finished her medical residency very much in debt, Dr. Jacobsen needed to borrow money to finance the opening of the clinic. She asked her mother to loan IOP Boogie Clinic $50,000 for operating funds to get started. Dr. Jacob- sen promised to pay her mother 6 percent interest on the loan. Dr. Jacobsen's mother was willing to make the loan. However, at the suggestion of Dr. Jacobsen's stepfather, Tom (a CPA), her mother asked her to prepare monthly financial statement forecasts for the clinic's first year of operation. Tom believed that the forecasting exercise would help Dr. Jacobsen anticipate potential operating problems and make more realistic operating choices. Dr. Jacobsen was not sure exactly how to prepare forecasted financial statements, but her stepfather said he would help her with the mechanics if she would provide the data

Questions:

1) Prepare the monthly forecasted income statements (operations statements) for IOP Boogie Clinic Inc. for January through December.

2) During what month does the clinic break even for monthly operations?

3) What is the approximate number of patients at the monthly operations breakeven point?

4) During what month does the clinic break even on a year-to-date (cumulative) basis?

5) What is the most critical forecasting assumption? Why?