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QUESTION

# Case 3 - Westside Hospital Time Required Volume Proportion Rate Hand imaging 10 minutes 60% \$100 Foot imaging 20 minutes 30% \$300 Forearm imaging 30...

The department’s labor expenses are expected to increase 5% next year due to an anticipated across-the-board pay raise.  Imaging materials expenses are expected to increase 6%, primarily due to increase in precious metals costs.  The department’s overhead expenses are forecasted to remain constant for the next year.

In addition to their individual cost increases, all three expenses are expected to increase by 10% due to the overall volume increase.

Prepare a budget for the next year by completing the following steps:

(a) Calculate the current volume for each imaging procedure by multiplying the total volume of 2,000 by the proportion for each procedure.

(b) Increase the current volumes by 10% to get the project volume for each procedure.

(c) Multiply the projected volume for each procedure by the rates to get gross projected revenues.

(d) Use the reimbursement rates to convert gross projected revenues to net projected revenue.

(e) Divide the current expenses in each category by current volume in that category to calculate current expense per procedure.

(f) Forecast expenses per procedure using individual expense increase information.

(g) Multiply the forecasted per-procedure expenses by the projected volume to get total expenses for the procedure.

(h) Prepare a summary income statement for overall revenues and expenses.

Use the attached Excel Spreadsheet to create the budget.

I have tried to solve this but I could not do the expenses part. I sort of solved mechanically I feel based on the instructions in the blue box but I feel the table headers (table 3 for expenses) says something different. Can you please tell me if this has been done correctly? Please used colored font for the changes in excel sheet.