healthcare finance

Exhibit 8–1 FIFO Inventory Effect

	Assumptions	FIFO Inventory Effect
Sales (Revenue)	20 units @$25 =		$500
Cost of Sales:
Beginning Inventory	10 units @$5 =	$50
Plus: Purchases	10 units @$10 = $100 &
	10 units @$5 = $150	250
Subtotal		$300
Less: Ending Inventory	10 units @$15 =	(150)
Cost of Sales			150
Gross Profit			$350
Operating Expenses			(50)
Earnings Before Tax			$300
Income Tax			(90)
Earnings After Tax			$210

Note: Ending inventory computed as number of units in the beginning inventory plus number of units purchased less number of units sold–count oldest units sold first.

Exhibit 8–2 LIFO Inventory Effect

	Assumptions	LIFO Inventory Effect
Sales (Revenue)	20 units @$25 =		$500
Cost of Sales:
Beginning Inventory	10 units @$5 =	$50
Plus: Purchases	10 units @$10 = $100 &
	10 units @$15 = $150	250
Subtotal		$300
Less: Ending Inventory	10 units @$15 =	(50)
Cost of Sales			250
Gross Profit			$250
Operating Expenses			(50)
Earnings Before Tax			$200
Income Tax			(60)
Earnings After Tax			$140

Note: Ending inventory computed as number of units purchased plus number of units in the beginning inventory less number of units sold–count newest units sold first.

Exhibit 9–2 Basic Calculation for Annualizing Master Staffing Plan

Step 1: How Many Net Paid Days Are Worked?

· (a) A business year has 364 days.

· (b) In this example the employee works five days per week. The other two days off are not paid for. Thus two days off per week times 52 weeks equals 104 non-paid days.

· (c) Therefore the number of paid days per year equals 364 less 104, or 260 days.

· (d) But not all paid days per year are worked. In this example each employee (RN, LPN, & Nurse Assistant [NA]) receives 35 personal leave days. (The personal leave days are intended to include holidays, sick leave, and vacation days.)

· (e) In addition these employees are entitled to continuing professional education (CPE) days. These are also paid days not worked, as follows: RNs = 5 days; LPNs = 3 days; NAs = 2 days.

· (f) Therefore the net paid days worked are as follows:

Step 2: How Are Net Paid Days Worked Converted to a Factor?

The factor is calculated by dividing total days in the business year (364) by the net paid days worked, as follows:

Exhibit 9–4 Staffing Requirements Example

Emergency Department Scheduling for 8-Hour Shifts:

	Shift 1 Day	Shift 2 Evening	Shift 3 Night	=	24-Hour Scheduling Total
Position:
Emergency Room Intake	1	1	1	=	3 8-hour shifts
To Cover Position
7 Days per Week
Equals FTEs of:	1.4	1.4	1.4	=	4.2 FTEs

One full-time employee works 40 hours per week. One 8-hour shift per day times 7 days per week equals 56 hours on duty. Therefore, to cover 7 days per week or 56 hours requires 1.4 times a 40-hour employee (56 hours divided by 40 hours equals 1.4), or 1.4 FTEs.