Case 6-Columbia Memorial Hospital
Case Study #6
Managerial Accounting
#1 With no change in volume (utilization), is the clinic projected to make a profit?
Currently the clinic sees about 45 patients per day and they have capacity to handle 85. If they continue how they are operating the clinic is looking at a loss of $3,173. At this rate the clinic will not be able to make a profit in spite of inflation over the next couple years.
#2 How many additional daily visits must be generated to break even?
There is an average of 1,230 visits a month, bringing in 47,037 a month in net revenue. Figure one tells us that in order to breakeven without the new marketing program the clinic will need to see 22 more patients per day, which brings it to a grand total of 67 patients that will need to be seen per day.
#3 Answer the same question as in question 2, but this time assume the marketing program has been implemented.
According to figure 2 in order to breakeven with the new marketing plan they would need to see 28 patients per day which is 6 more than without the marketing plan. The total of patients needing to be seen per day with this marketing plan is 73.
#4 How many incremental daily visits would it take to pay for the marketing program, irrespective of overall clinic profitability?
Now according to figure 3 in order for the clinic to pay for the marketing plan it would need to have 22 consecutive days in operation seeing 73 patients per day.
#5 Which items in the statement were easiest to project and why? Which were the most difficult and why? What effect could mis-estimates have had on projections? Which items would cause the most damage if mis-estimated?
The items in the statement that were easiest to project were the building lease, and equipment rental because the historical financial data have shown each have been consistently around the same cost. The equipment rental has been the exact same on the statement in the previous years and the building lease looks to be almost the same
Managerial Accounting
#1 With no change in volume (utilization), is the clinic projected to make a profit?
Currently the clinic sees about 45 patients per day and they have capacity to handle 85. If they continue how they are operating the clinic is looking at a loss of $3,173. At this rate the clinic will not be able to make a profit in spite of inflation over the next couple years.
#2 How many additional daily visits must be generated to break even?
There is an average of 1,230 visits a month, bringing in 47,037 a month in net revenue. Figure one tells us that in order to breakeven without the new marketing program the clinic will need to see 22 more patients per day, which brings it to a grand total of 67 patients that will need to be seen per day.
#3 Answer the same question as in question 2, but this time assume the marketing program has been implemented.
According to figure 2 in order to breakeven with the new marketing plan they would need to see 28 patients per day which is 6 more than without the marketing plan. The total of patients needing to be seen per day with this marketing plan is 73.
#4 How many incremental daily visits would it take to pay for the marketing program, irrespective of overall clinic profitability?
Now according to figure 3 in order for the clinic to pay for the marketing plan it would need to have 22 consecutive days in operation seeing 73 patients per day.
#5 Which items in the statement were easiest to project and why? Which were the most difficult and why? What effect could mis-estimates have had on projections? Which items would cause the most damage if mis-estimated?
The items in the statement that were easiest to project were the building lease, and equipment rental because the historical financial data have shown each have been consistently around the same cost. The equipment rental has been the exact same on the statement in the previous years and the building lease looks to be almost the same