1 2 3 FM007 Analyze Financial Data Discounted payback period

1 2 3 FM007. Analyze Financial Data Discounted payback period to 2-page report, provide your recommendation with rationale. pollcy of · Ina assuming Jiranna has a corporate themselves, and assuming an \"% cost of capital as to wrethe, the project is not accepting projects that take more than 35 years to pay for Part III: Conduct a Budgeting Evaluation You are an administr rator at Jiranna Healthcare. You have been asked to conduct a budget variance analysis analyzing performance by comparing budgeted workload, revenue, and expenses for a range of different service lines, with actual workload, revenue, and expenses for those service lines Open the document \"Variance Analysis Case Study,\" where you will find data on the expenses, revenue, and inpatient product lines at Jiranna Healthcare Analyze the data and prepare a 3- to 4-page report. in your report, address each of the five following questions. in each case, show the calculations that you conducted to answer the question. Then, explain your conclusion and how your calculations support your reasoning . What was the hospital\'s original profit forecast (assume away ary issues with depreciation, taxes, etc.J? Haltway through the fiscal year, what is the hospitals revised projection for FY1I profits? Which inpatient service lines are over budget? Which inpatient service lines are over budget after accounting for workload increases? What two actions would you recommend be taken at the mid-year point if you oversaw a fee-for-service hospital? In other words, where are the problern areas on which you would focus your attention, and who might provide ideas for best practices\" based on their performance? What two actions would you recommend bo taken at the mid-year point if you oversaw a capitated hospital? In this case, the revenue spreadsheet would be replaced with an overall budget of $50 million with which to operate (rathe than being able to bill for each episode of patient care). Federal, state, county, and city hospitals normally operate under a capped budget. Additionally, many HMOs also operate under a fixed per member, per month (PMPM) capitated process

Solution

Variance analysis can also be applied to non-manufacturing industries with minor modifications. In a service industry setting, the material price and usage variances are less significant because direct materials constitute a very small percentage of total costs for firms in service industry. Consequently labor and overhead variances are more important. For example, in a hospital, the hours and costs of various categories of labor like nurses, interns, general practitioners, surgeons etc. and overhead like medical equipment, support staff etc. are of greater importance. Therefore, variance analysis in a service company will focus mostly on direct labor and overhead variances.

Many firms in service industries have implemented activity based costing systems by going through the process of identifying various cost drivers within the organization. This causes some components of fixed costs such as setup, quality assurance, secretarial services etc. to become variable with respect to the appropriate cost drivers. Analysis of the flexible budget could easily be extended to service companies to provide a more accurate benchmark against which to compare actual costs.

Furthermore, while the production volume variance is applicable to manufacturing companies, it has limited applicability to service companies, which have little or no production activity. However, certain service industries have developed their own well accepted measures of production.

Variance Analysis
Jiranna Healthcare
Inpatient
Inpatient product line	Price ($)	Forecasted for FY 11	Projected IP Revenue ($)	Budget ($)	FY 11 Budget	Profit Forecast
CIRC	6010.65	#	4351711	5475.81	4202356	149355
DIGEST	6021.65	#	6988125	5476.81	6737188	250937
ENT	6001.65	#	780215	5477.81	754842	25373
GYN	6013.65	#	1313983	5478.81	1268947	45036
MENTAL HEALTH	502.99	#	679539	498.78	714283	-34744
NERVOUS	6103.65	#	1391632	5478.81	1324119	67513
NEWBORN	7014.71	#	5141782	5478.81	4256926	884856
OB	5713.65	#	8576189	5478.81	8717115	-140926
ORTHO	6084.18	#	3839118	5478.81	3664557	174561
OTHER	6018.14	#	12951037	5478.81	12497823	453214
RESP	6118.73	#	4142380	5478.81	3931704	210676