Budgeting Classwork for Management Class

Version 1

Budget Exercise In-class

You are preparing the budget for next year, you have been told the following by the finance department:

· Expect a 4% increase in private insurance

· Expect a 3% increase in self pay

· Expect to receive 2.5% less income from Medicare

· Expect to receive 1% less income from HMO patients

· Your office received a notice that there will be a 4% increase in rent

· Wages are expected to increase by 1.25%. This will also increase the Holiday and Vacation totals. Your office strives to maintain or reduce OT and sick time.

Once you have made all the adjustments determine if you made a profit or loss. If a loss, what adjustments will you need to make to balance the budget or even project a profit? Make at least three line item adjustments and indicate a rational for each line item.

Class Budget Exercise Worksheet

Expect a 4% increase in private insurance

Private Insurance is $80,880

Expect a 3% increase in self pay

Self-pay is $28,300

Expect to receive 2.5% less income from Medicare

Medicare is $105,000

Expect to receive 1% less income from HMO patients

HMO is $55,000

There will be a 4% increase in rent

Rent is $23,500

Wages are expected to increase by 1.25%

Wages are $150,600

Holiday increase by 1.25%

Holiday is $14,000

Vacation increase by 1.25%

Vacation is $27,000