A Budget is a fiscal program for the extroverted twelvemonth, which is drawn up to assist an organisation whether it is private or governmental, to accomplish its aims. The chief ground of this study is to supply a new strategic planning and control, for income and outgo and capital investing to St. Edith Memorial Hospital, in order to avoid shortages and incorrect capital investing determination in the hereafter fiscal twelvemonth of the infirmary.
GENERAL BACKGROUND OF ST. EDITH Hospital:
The St. Edith Memorial Hospital is located in North American City, which functioning stable population. Its general purpose infirmary, grosss come from Government grants ( cardinal and local ) and Medical Insurance Companies. Basically, the infirmary constituted the undermentioned sections ; Administration section, Medical & A ; Pharmaceutical sections and Information Technology & A ; Communication ( IT & A ; Communications ) section.
The information or information is gathered from the present state of affairs of the infirmary, by utilizing SWOT analysis tool ( see page 1 ) . Because the SWOT analysis is a strategic planning method used to measure the Strengths, Weaknesses, Opportunities and Threats involved in an organisation. And comparing is traveling to be transporting out between St. Edith and Neighbouring Hospital. Since the income and outgo of both two infirmaries are given for comparing.
RESULT OR FINDINGS:
The following table represent income and outgo of St. Edith and Neighbouring Hospital for the twelvemonth 2004 severally.
Analysis Of Datas:
Quantitative Dimensional Analysis between St. Edith and Neighbouring Hospital.
Base on the above tabular array, the public presentation of the Neighbouring infirmary is better and good comparison with St. Edith infirmary. Merely IT & A ; Communication disbursals shown good public presentation ( – ) , while is non precedence in the general aim of the infirmary.
Other factors: –
Drugs spent per patients:
St. Edith = 25,000 = ?2.35
Neighboring = 30,000 = ?2.36
Variable Cost per patients:
St. Edith = 7,000 = 0.66p
Neighboring = 12,000 = 0.94p
Discussion and reading of informations:
The entire gross received by St. Edith in the twelvemonth 2004, is ?115,000, while the entire outgo is ?125,000. This resulted a shortage of ? ( 10,000 ) . Compared with Neighbouring infirmary with entire income of ?170,000, while the entire outgo ?145,000, this consequence a excess of ?25,000
The shortage incurred by St. Edith in 2004 as consequence of lessening in its Gross and increase in its outgo. What are the causes? The reply is deficiency of usage of Budget and Budgetary and Control procedure.
Budgetary and command procedure and pattern
The budgetary procedure is an built-in portion of both planning and control. Too frequently budgets are associated with negative, cheeseparing control activities whereas the full procedure is much broader and more positive than that. Budgeting is about doing programs for the hereafter, implementing those programs and monitoring activities to see whether they conform to the program.
Budgetary control relates to the constitution of budgets associating the duties of budget holders the demands of a policy. Budgetary control besides relates to the uninterrupted comparing of existent with budgeted consequences: it does this to seek to guarantee that the aims of that policy are achieved ; or to supply a footing for the alteration of those aims.
In drumhead, a budget is a statement puting out the pecuniary, numerical or non quantitative facets of an administration ‘s programs for the approaching twelvemonth. Budgetary control is the analysis of what happened when those programs came to be put into pattern, and what the administration did or did non make to rectify for any fluctuations from these programs.
The followers is shown best pattern of budgetary and control procedures
Monitoring & A ; REVIEW
How does the St. Edith infirmary prepare budgetary and control procedure:
They manner the direction of St. Edith fix their ain budget is, the powerful group in each sections present their ain demands which would non assist to accomplish the chief aims of the Hospital.
Every organisation has a mission or intent, which are purposes to carry through. Strategic planning is the procedure of specifying the primary aims of the organisation and finding a class of action or inventing a scheme to accomplish those aims
Aims of any organisation is first measure of good budgetary control procedure, but, all the sections of St. Edith Memorial infirmary are neglect or forgot the chief aims of the infirmary and concentrating on their ain departmental demands.
How does this comparison with the best pattern?
Budgets are frequently used to exercise a grade of control over the costs of the concern, in an effort to accomplish additions in efficiency. Base on the tabular array: 1, by comparing between St. Edith Hospital and Neighbouring Hospital, the best pattern is very-very hapless.
What would be the most appropriate procedure for the St. Edith?
Here, I suggest that, to implement the usage of ZERO BASED BUDGET, because it is frequently used in an economic recession or downswing, when money is non readily available and organisation want to do cutbacks in its outgo.
Zero budgets help the organisation to place those sections which require big sum of indispensable capital investing and daily outgo, every bit good as placing those sections which require a minimum outgo.
Use of Cost Centre:
A cost Centre is an country of an organisation where costs can be identified as being incurred, like ; labour cost, stuff and capital outgo.
The grounds used of cost Centres are
Leting the organisation sees which section and staffs are passing the most money.
To see if the sections and staff are bring forthing adequate benefit for the concern with money the have spend.
CONCLUSIONS AND RECOMMENDATIONS:
Basically, there are two intents of budget. One – being to supply a map of where the administration and its component parts intend to travel. Two – being to organize a footing for control.
Every administration has a mission or intent, which is what aims to carry through. Strategic planning is the procedure of specifying the primary aims of the administration and finding a class of action or inventing a scheme to accomplish those aims.
There are many other factors that a concern will necessitate to take into consideration when measuring an investing undertaking, other than the fiscal ( quantitative ) factors.
Qualitative factors such as the aims of the administration must be considered at all times, because the chief aims of St. Edith included ; profession ( medical, surgical, ethical ) staffs, modern medical equipments and installations in order to pull its clients and stakeholders.
The internal and external environment demands to be considered before any determination can be taken sing a proposed investing undertaking. Neighbouring infirmary is rival to the infirmary, staff and patients are traveling off to the neighbouring infirmary, mensurable action demand to be taking, in order to convey staff and patients back.
Other factors include the province of the economic system, for case decrease in grant from authorities ; it may be unsafe of effort to better new undertakings or unneeded outgo at the present state of affairs.
Finally, for the any future investing determination, the infirmary will besides necessitate to see the sum of finance that is available for capital assessment. And following twelvemonth budget is better to utilize Zero Based Budget and besides is good to utilize fringy costing and cost-volume-profit analysis ( CVP Analysis ) to return the income and outgo to interrupt even for following twelvemonth budget.
Calculation OF RATIO ANALYSIS
Labour Cost ( 2004 ) = 55,000 ten 100 = 47.8 %
Labour Cost ( 2003 ) = 53,000 ten 100 = 44.9 %
Depreciation ( 2004 ) = 20,000 ten 100 = 17.4 %
Depreciation ( 2003 ) = 19,000 ten 100 = 16.1 %
Drugs ( 2004 ) = 25,000 x100 = 21.7 %
Drugs ( 2003 ) = 22,000 ten 100 = 18.6 %
IT & A ; C ( 2004 ) = 3,000 ten 100 = 2.6 %
IT & A ; C ( 2003 ) = 2,000 ten 100 = 1.6 %
Other Variable ( 2004 ) = 7,000 ten 100 = 6.01 %
Other Variable ( 2003 ) = 7,000 ten 100 = 5.9 %
Fixed Cost ( 2004 ) = 15,000 ten 100 = 13.04 %
Fixed Cost ( 2003 ) = 15,000 ten 100 = 12.7 %
The above tabular array is bespeaking differences between income and outgo of the St. Edith Memorial for the twelvemonth 2004 and 2003. Base on the twelvemonth 2003 the 0 % represent neither excess nor shortage. While for the twelvemonth 2004 is bespeaking surplus of outgo over income by 8.55 % significance it is a shortage. Comparing with above tabular array, the outgos are increased by the certain per centum from 2003 to 2004, this is ground why the infirmary gets a shortages.
Break Even Point = Fixed Cost
Contribution per Unit
Where: Fixed Cost = ?93,000
Contribution per unit = Total Revenue per unit – Variable cost per unit
Entire gross per unit = Total Revenue
Entire gross per unit = ?115,000 = ?10.79812207
Variable cost per unit = Total variable cost
Variable cost per unit = ?32,000 = ?3.004694836
Break even points ( patients ) = ?93,000 = 11,933 patients
10.7981 – 3.0047
Margin of Safety = Actual Patients – Break even patients x 100
Break even patients
Margin of Safety = 11,933 – 10650 x 100 = 10.75 %
Where: Fixed cost = ?89,000
Entire gross per unit = ?118,000 = ?10.82568807
Variable cost per unit = ?29,000 = ?2.660550459
Break even points ( patients ) = ?89,000 = 10,900 patients
10.8256 – 2.6605
Net income AND LOSS FORCAST USING MARGINAL Costing
St. Edith Memorial Hospital Income Statement for the Year 2004
Entire Revenue ( 11,933 x ?10.798 )
Less: Variable Cost ( 11,933 X 3.0046 )
Less: Fixed Cost
St. Edith Memorial Hospital Income Statement for the Year 2003
Entire Revenue ( 10,900 x 10.8256 )
Less: variable cost ( 10,900 x 2.6605 )
Less: Fixed Cost
ST. EDITH BREAK EVEN CHART 2004
Based on the above interruption even chart of St. Edith is bespeaking that, the infirmary to accomplish interrupt even the most attend at least 11,933 patients.
Improvement of St. Edith Financial and Medical Performance
Contribution public presentation, because it represent the sum of moneys which are available to lend toward covering the fixed costs of the infirmary.
There is addition of staff of the St. Edith infirmary by 3.09 % , while lessening of staff of Neighbouring infirmary to 4.3 % in the twelvemonth 2004.
Where an administration fails to make its Break even indicate, like St. Edith in 2004, one of the three should be consider ; addition in gross or lessening in cost and or both.
As I said in the portion two ( 2 ) of this assignment, is good to the infirmary to utilize fringy costing and CVP Analysis for following twelvemonth budget, the above net income and loss prognosiss are illustrations for Budget program.
Fringy costing techniques are used for short term decision-making intents, necessitating that all costs be identified as either fixed or variable.
Cost-volume-profit analysis is peculiarly helpful in helping direction to do determinations.
Therefore, base on the above net income and loss prognosis, the direction of St. Edith memorial infirmary can be used it as the bill of exchange for following twelvemonth ( 2005 ) budget program.