Fixation of Salary

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Health Medical

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One of the decisions that a healthcare finance manager has to make is whether to allow budgets to change over the course of a reporting period. A budget that never changes is called static, while a budget that changes based on actual activity is called flexible. Both approaches offer advantages and disadvantages for the healthcare organization.

Refer to the attached lecture titled "Static and Flexible Budgets, An Example". In the example of the walk-in clinic, if you had the option of retaining the nurse practitioner on a salary, what salary would you offer? Why?

At least 150 words- Include references

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Static and Flexible Budgets, An Example Let's assume a walk-in medical clinic offers a routine medical procedure and incurs the following costs: Incurred Cost $40 Medical resident's salary (0.5 hr per patient at $80 per hr) Other variable costs (medical supplies per patient) Fixed cost of clinic per month $14 $6,000 Suppose management estimates for budgetary purposes that 3,600 patients will be treated in a year. Under a static budget, this translates to 300 patients each month and the estimated total monthly costs are: Estimated Total Monthly Costs 300 $12,000 Estimated number of medical procedures Medical resident's salary (0.5 hr x $80 per hr x 300 patients) Other variable costs ($14 x 300 patients) Fixed cost of clinic per month Total monthly budgeted cost 4,200 6,000 $22,000 Using a flexible budget, it is a simple matter to calculate total estimated cost at different autout lovala luoto CAD 12ondialenod.. worn Using a flexible budget, it is a simple matter to calculate total estimated cost at different output levels and evaluate performance. If 380 medical procedures were actually performed during the month then the budgeted monthly cost should be: Estimated Total Monthly Costs 380 $15,200 Actual number of medical procedures Medical resident's salary (0.5 hr x $80 per hr x 380 patients) Other variable costs ($14 x 380 patients) Fixed cost of clinic per month Total monthly budgeted cost 5,320 6,000 $26,520 As you can see there is a difference of $4,320 between the static budget and the flexible budget estimated costs for the same month. Let's take the example one step further. What if the actual costs for the month totaled $27,000? The difference between the budget and the actual-called variance—would be $4,800 under the static budget but only $480 under the flexible budget. That's why flexible budgeting makes so much more sense to use-management is then comparing apples to apples, not apples to oranges. Variance reporting in traditional or static budgets seldom, if ever, provides meaningful or useful information upon which appropriate management decisions can be based. More about variance analysis next.
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Explanation & Answer

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Surname 1
Name:
Professor Name
Course/code
Date
SALARY FIXATION
If I had the option to retain the nurse practitioner on a salary, I would offer a salary of
$15,000. Salary fixation is a finance managerial decision that I would have arrived at after
considering a number of ...


Anonymous
Very useful material for studying!

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