Assignment Dr. Stephanie White,
Dr. Stephanie White, is concerned about the dilemma of coping with reduced budgetsd and demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below data from past year.
Program Area Costs Administration Salaries: Administrator 60,000 Assist 35,000 2 Secretaries 42,000 Supplies 35,000 Advert & promotion 9,000 Professional meetings/dues 14,000 Purchased Services:Acct & bill 15,000 Custodial 13,000 Security 12,000 Consulting 10,000 Community Mental Health Services Salaries (two s w) 46,000 ;Trans 10,000 Outpt mental health tx Salaries:Psychiatrist 86,000 2 SW 70,000
Give a Give a dollar range of costs to reduce budgets (worst and best case analysis). You need to cut $94,000 in cost. Prioritize those cuts that can be made withwithout impacting the operation or quality care of the organization.How would you advise Dr. White to prepare for reduced budgets? excel spread sheet
Solution
To be able to answer the questions and decide on costs that could be cut, we must divide costs into discretionary and committed costs. Discretionary Fixed Costs (also known as Managed Fixed Costs) usually arise from annual decisions by management to spend in certain fixed costs. There are basically 2 differences between Discretionary and Committed Fixed Costs; 1) The planning horizon for Discretionary Fixed Costs is fairly short-term, usually a single year; and 2) Discretionary Fixed Costs can be cut for short periods of time with minimal damage to the long-run goals of the organization.
In the attached excel sheet I listed all costs & divided them into Committed and Discretionary.
Some of the costs that I have listed as Discretionary (Transportation, for example) might be on a long-term contract, and in that case they would become Committed.
1. Give a dollar range of costs to reduce budgets (worst and best case analysis).
Best Case Scenario: Costs that Could be Cut:
Program Area Costs Administration Salaries: Administrator 60,000 Assist 35,000 2 Secretaries 42,000 Supplies 35,000 Advert & promotion 9,000 Professional meetings/dues 14,000 Purchased Services:Acct & bill 15,000 Custodial 13,000 Security 12,000 Consulting 10,000 Community Mental Health Services Salaries (two s w) 46,000 ;Trans 10,000 Outpt mental health tx Salaries:Psychiatrist 86,000 2 SW 70,000
Give a Give a dollar range of costs to reduce budgets (worst and best case analysis). You need to cut $94,000 in cost. Prioritize those cuts that can be made withwithout impacting the operation or quality care of the organization.How would you advise Dr. White to prepare for reduced budgets? excel spread sheet
Solution
To be able to answer the questions and decide on costs that could be cut, we must divide costs into discretionary and committed costs. Discretionary Fixed Costs (also known as Managed Fixed Costs) usually arise from annual decisions by management to spend in certain fixed costs. There are basically 2 differences between Discretionary and Committed Fixed Costs; 1) The planning horizon for Discretionary Fixed Costs is fairly short-term, usually a single year; and 2) Discretionary Fixed Costs can be cut for short periods of time with minimal damage to the long-run goals of the organization.
In the attached excel sheet I listed all costs & divided them into Committed and Discretionary.
Some of the costs that I have listed as Discretionary (Transportation, for example) might be on a long-term contract, and in that case they would become Committed.
1. Give a dollar range of costs to reduce budgets (worst and best case analysis).
Best Case Scenario: Costs that Could be Cut: