Expense Forecasting And Benchmarking

Expense Forecasting And Benchmarking

Looking Ahead: Application Assignment: Expense Forecasting and Financial Analysis Cycle
You will begin this assignment in Week 9 and it will be due by Day 7 of Week 10.
Throughout this course, you’ve examined the importance of anticipating financial fluctuations that may impact your organization’s ability to provide services. While financial managers have no time machines or crystal balls, they do have expense forecasts. Expense forecasting is one of the preeminent tools that financial managers can use to prepare their organizations for future fiscal turbulence. In this Assignment, you will examine a scenario and generate a corresponding expense forecast in Excel.
Before pursuing an opportunity or making a major purchase, financial decision makers must first ascertain if the expenditures are justified. Determining whether a new process, system, or purchase will yield worthwhile returns is no easy task. However, managers have a variety of tools to help them decide whether the new expenditure is warranted. Analyzing a venture’s benefit/cost ratio, marginal profit and loss statement, and break-even points enable nurse managers to make educated decisions about how they choose to commit their funds.

Note: For those Assignments in this course that require you to perform calculations you must:Use the Excel spreadsheet template for the Week 3 assignment
Show all your calculations and formulas in the spreadsheet.
Answer any questions included with the problems (as text in the Excel spreadsheet).

A title and reference page are NOT needed in this assignment.  Put your name and assignment at the top of the Excel spreadsheet.
For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials.
To prepare:

Use the Week 10 Application Assignment Template, provided in this week’s Learning Resources, to complete this assignment.   Carefully examine the information in each of the scenarios and provide the necessary calculations. Using this information will help you answer the questions. Note: All the scenarios will be submitted as one document. Each scenario will be on a different tab in the spreadsheet.
Expense Forecasting
In this Application Assignment you calculate scenarios focusing on benefit/cost ratio analysis, marginal profit and loss statements, and break-even analysis. For these scenarios, you will utilize the provided figures to perform calculations and then make recommendations about the viability of the investment opportunities
Expense Forecasting Scenario
Your department has performed 20,000 procedures during the first six months (January–June) of 20X1. Spending during that period of time was $210,000 for fixed expense items and $1,200,000 for variable expense items. Of those amounts, $50,000 of fixed expense money was spent on preparing for a Joint Commission survey. Volume is anticipated to be 10% higher in the second half of the year. On November 1st, two new procedure technicians will begin work. The salary and fringe benefit costs for each are $96,000/year. Based on the information provided, prepare an expense forecast for 20X1.
Annualization for Fixed:  (Adjusted Total for Year to Date Expense/6) * 12 =Total Annualized Amounts
Annualization for Variable (Adjusted Total for Year to Date Expense/ 20,000) * 40,000 =Total Annualized Amounts.
Financial Analysis Cycle

Marginal Profit and Loss Statement Scenario

You are examining a proposal for a new business opportunity – a new procedure for which demand is expected to be 1,400 units the first year, growing by 600 units a year thereafter. The price charged per procedure is $1,000. The collection rate is anticipated to be 80%. Each procedure consumes $300 of supplies. Salary cost is estimated to cost $540,000 each year, fringe benefits are 25% of salaries, rent for the facility is $55,000/yr and operating cost are $120,000/yr.
Questions:

  1. Develop a marginal profit and loss statement for this business opportunity.Based on that analysis, should this opportunity be pursued?
Break-Even Analysis Scenario

You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420.
Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation?  Explain your decision.

Benefit/Cost Ratio Analysis Scenario

You are considering the acquisition of a new piece of equipment with a useful life of five years. This new technology will make your clinical operation more efficient and allow for a reduction of 10 FTEs. The equipment purchase price is $4,500,000 plus 10% installation fee. The purchase price includes service for the first year, an item that has an annual cost of $10,000. There is a potential for additional volume of 150,000 units in the first year, growing by 30,000 each year thereafter. The price charged per unit is $15.00 with a 50% collection rate. The staff being eliminated are paid $12.50 per hour. The fringe benefits rate is 20%. The hurdle rate is 7.5%.
Questions: After reviewing Dr. Ward’s Video and the calculations below, please answer the following questions:

  • What is meant by  benefit/cost ratio, average payback period and ROI  and why are the all  important to understand when purchasing new equipment?
  • Based on this information, would you pursue this opportunity?
  • Expense Forecasting

    Name Assignment
    Expense Forecasting
    Based on the information provided, prepare an expense forecast for 20X1 using the template below:
    Spending during January- June 20X1 (6 months)
    ·      Fixed expense items: $210,000
    ·      Variable expense items: $1,200,000
    ·      One time expense: $50,000 of fixed expense money was spent on preparing for a Joint Commission survey
    Procedures preformed during January- June 20X1 (6 months)
    ·      Your department has performed 20,000 procedures during the first six months
    On November 1,20X1, two new procedure technicians will begin work. The salary and fringe benefit costs for each is: $96,000 yearly
    Description Fixed Variable TOTAL
    Year to Date Expense
    Adjustments
    Add back “One Time” credits
    Deduct “one Time” expenses
    Adjusted total for year to date expense
    Annualization
    Divide by months (fixed) 6
    Multiple by months (fixed) 12
    Divide by volume 20,000
    Multiply by volume 40,000
    Annualized Amounts
    Adjustments
    Add back “One Time” expenses
    Deduct “One Time” credits
    Expense two new technicians
    Expense Forecast as of 12/31/X1
    Calculations:
    Annualization for Fixed: (Adjusted Total for Year to Date Expense/6) * 12 =Total Annualized Amounts
     
    Annualization for Variable (Adjusted Total for Year to Date Expense/ 20,000) * 40,000 =Total Annualized Amounts

    Marginal Profit and Loss

    Marginal Profit and Loss Statement Scenario
    You are examining a proposal for a new business opportunity – a new procedure for which demand is expected to be 1,400 units the first year, growing by 600 units each year thereafter. The price charged per procedure is $1,000. The collection rate is anticipated to be 80%. Each procedure consumes $300 of supplies. Salary cost is estimated to cost $540,000 each year, fringe benefits are 25% of salaries, rent for the facility is $55,000/yr and operating cost are $120,000/yr.
    Year One Year Two Year Three Year Four Year Five
    Marginal Revenue
    Units of Volume
    Price Procedure
    Collection Rate
    Marginal Net Revenue
    Marginal Costs
    Variable Costs
    Units of Volume
    Variable Cost Supplies per Unit/procedure
    Marginal Variable Cost
    Fixed Costs
    Salary Costs
    Fringe Benefits
    Rent
    Operating Cost
    Marginal Fixed Costs
    Total Marginal Costs
    Annual Marginal Profit
    Cumulative Profit Margin
    Question: Below is a marginal P&L for this business opportunity. Based on that analysis, should this opportunity be pursued. Explain your decision.
    Answer:

    Breakeven Analysis

    Break-Even Analysis Scenario
    You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420.
    Price to be Charged
    Collection Rate
    Average Collection per Service
    Variable cost per unit of service
    Fixed Operating Costs
    Break-Even Point =
    Fixed Cost/(Net Revenue per Unit-Variable Cost per Unit)
    Capacity:
    Demand:
    Breakeven:
    Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation? Explain your decision.
    Answer:

    Benefit Cost Ratio

    Benefit/Cost Ratio Analysis Scenario
    You are considering the acquisition of a new piece of equipment with a useful life of five years. This new technology will make your clinical operation more efficient and allow for a reduction of 10 FTEs. The equipment purchase price is $4,500,000 plus 10% installation fee. The purchase price includes service for the first year, an item that has an annual cost of $10,000. There is a potential for additional volume of 150,000 units in the first year, growing by 30,000 each year thereafter. The price charged per unit is $15.00 with a 50% collection rate. The staff being eliminated are paid $12.50 per hour. The fringe benefits rate is 20%. The hurdle rate is 7.5%.
    Question: After reviewing Dr. Ward’s Video and the calculations below, please answer the following questions: 1. What is meant by benefit/cost ratio, average payback period and ROI and why are the all important to understand when purchasing new equipment? Based on this information, would you pursue this opportunity? Explain your decision in 250-500 words in the text box below.
    Investment Present Value
    Present Value Factors
    Total Investment Present Value
    Construction Equipment Installation Other
    Year 0 $ 4,500,000 $ 450,000 $ 4,950,000 1 $ 4,950,000
    Year 1
    Year 2
    Year 3
    Year 4
    Total $ 4,500,000 $ 450,000 $ 4,950,000 $ 4,950,000
    Benefit Present Value
    Present Value Factors
    Revenue Increases Revenue Decreases Expense Decreases Expense Increases Total Benefit Present Value
    Year 1 1,125,000 312,000 1,437,000 0.93 1,336,744
    Year 2 1,350,000 312,000 10,000 1,652,000 0.865 1,429,529
    Year 3 1,575,000 312,000 10,000 1,877,000 0.805 1,510,911
    Year 4 1,800,000 312,000 10,000 2,102,000 0.749 1,573,979
    Year 5 2,025,000 312,000 10,000 2,327,000 0.697 1,620,892
    Total 7,875,000 1,560,000 40,000 9,395,000 7,472,055
    Net Present Value 2,522,055
    Benefit/Cost Ratio 1.51
    Total Cash Inflow 9,395,000
    Average annual cash inflow 1,879,000
    Average payback period (in Years) 2.6
    Return on investment = Average Annual Return / Average Investment
    = ( Total Benefit / Total Years ) / (Investment / 2)
    = ( $9,395,000 / 5 ) / ( $4,950,000 / 2 )
    = $1,879,000 / $2,470,000
    = 76%
    Answer:

    Explain your decision  in 250-500 words in the text box below.

    ADDITIONAL INSTRUCTIONS FOR THE CLASS

    Who We Are 

    We are a professional custom writing website. If you have searched for a question and bumped into our website just know you are in the right place to get help with your coursework.

    Do you handle any type of coursework?

    Yes. We have posted our previous orders to display our experience. Since we have done this question before, we can also do it for you. To make sure we do it perfectly, please fill out our Order Form. Filling the order form correctly will assist our team in referencing, specifications, and future communication.

    Is it hard to Place an Order?

    • 1. Click on “Order Now” on the main Menu and a new page will appear with an order form to be filled.
    • 2. Fill in your paper’s requirements in the “PAPER INFORMATION” section and the system will calculate your order price/cost.
    • 3. Fill in your paper’s academic level, deadline, and the required number of pages from the drop-down menus.
    • 4. Click “FINAL STEP” to enter your registration details and get an account with us for record-keeping and then, click on “PROCEED TO CHECKOUT” at the bottom of the page.
    • 5. From there, the payment sections will show, follow the guided payment process and your order will be available for our writing team to work on it.

    SCORE A+ WITH HELP FROM OUR PROFESSIONAL WRITERS: ORDER NOW FOR AN ORIGINAL PAPER ASSIGNMENT

    We will process your orders through multiple stages and checks to ensure that what we are delivering to you, in the end, is something that is precise as you envisioned it. All of our essay writing service products are 100% original, ensuring that there is no plagiarism in them. The sources are well-researched and cited so it is interesting. Our goal is to help as many students as possible with their assignments, i.e. our prices are affordable and services premium.

    • Discussion Questions (DQ)

    Initial responses to the DQ should address all components of the questions asked, including a minimum of one scholarly source, and be at least 250 words. Successful responses are substantive (i.e., add something new to the discussion, engage others in the discussion, well-developed idea) and include at least one scholarly source. One or two-sentence responses, simple statements of agreement or “good post,” and responses that are off-topic will not count as substantive. Substantive responses should be at least 150 words. I encourage you to incorporate the readings from the week (as applicable) into your responses.

    • Weekly Participation

    Your initial responses to the mandatory DQ do not count toward participation and are graded separately. In addition to the DQ responses, you must post at least one reply to peers (or me) on three separate days, for a total of three replies. Participation posts do not require a scholarly source/citation (unless you cite someone else’s work). Part of your weekly participation includes viewing the weekly announcement and attesting to watching it in the comments. These announcements are made to ensure you understand everything that is due during the week.

    • APA Format and Writing Quality

    Familiarize yourself with the APA format and practice using it correctly. It is used for most writing assignments for your degree. Visit the Writing Center in the Student Success Center, under the Resources tab in Loud-cloud for APA paper templates, citation examples, tips, etc. Points will be deducted for poor use of APA format or absence of APA format (if required). Cite all sources of information! When in doubt, cite the source. Paraphrasing also requires a citation. I highly recommend using the APA Publication Manual, 6th edition.

    • Use of Direct Quotes

    I discourage over-utilization of direct quotes in DQs and assignments at the Master’s level and deduct points accordingly. As Masters’ level students, it is important that you be able to critically analyze and interpret information from journal articles and other resources. Simply restating someone else’s words does not demonstrate an understanding of the content or critical analysis of the content. It is best to paraphrase content and cite your source.

    • LopesWrite Policy

    For assignments that need to be submitted to Lopes Write, please be sure you have received your report and Similarity Index (SI) percentage BEFORE you do a “final submit” to me. Once you have received your report, please review it. This report will show you grammatical, punctuation, and spelling errors that can easily be fixed. Take the extra few minutes to review instead of getting counted off for these mistakes. Review your similarities. Did you forget to cite something? Did you not paraphrase well enough? Is your paper made up of someone else’s thoughts more than your own? Visit the Writing Center in the Student Success Center, under the Resources tab in Loud-cloud for tips on improving your paper and SI score.

    • Late Policy

    The university’s policy on late assignments is a 10% penalty PER DAY LATE. This also applies to late DQ replies. Please communicate with me if you anticipate having to submit an assignment late. I am happy to be flexible, with advance notice. We may be able to work out an extension based on extenuating circumstances. If you do not communicate with me before submitting an assignment late, the GCU late policy will be in effect. I do not accept assignments that are two or more weeks late unless we have worked out an extension. As per policy, no assignments are accepted after the last day of class. Any assignment submitted after midnight on the last day of class will not be accepted for grading.

    • Communication

    Communication is so very important. There are multiple ways to communicate with me: Questions to Instructor Forum: This is a great place to ask course content or assignment questions. If you have a question, there is a good chance one of your peers does as well. This is a public forum for the class. Individual Forum: This is a private forum to ask me questions or send me messages. This will be checked at least once every 24 hours.

    • Guarantee

    • Zero Plagiarism
    • On-time delivery
    • A-Grade Papers
    • Free Revision
    • 24/7 Support
    • 100% Confidentiality
    • Professional Writers

    • Services Offered

    • Custom paper writing
    • Question and answers
    • Essay paper writing
    • Editing and proofreading
    • Plagiarism removal services
    • Multiple answer questions

    SCORE A+ WITH HELP FROM OUR PROFESSIONAL WRITERS: ORDER NOW FOR AN ORIGINAL PAPER ASSIGNMENT

    We will process your orders through multiple stages and checks to ensure that what we are delivering to you, in the end, is something that is precise as you envisioned it. All of our essay writing service products are 100% original, ensuring that there is no plagiarism in them. The sources are well-researched and cited so it is interesting. Our goal is to help as many students as possible with their assignments, i.e. our prices are affordable and services premium.

    Looking for a Similar Assignment? Order a custom-written, plagiarism-free paper

Comments are closed.