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Part 1 Carroll Clinic 2011 Operating Budget vs. Actual BUDGET ACTUAL Volume I. Assumptions A. FFS 36,000 visits 34,000 B. Capitated Lives 30,000 members 30,000 Number of member 360,000 360,000 months Expected utilization per 0.15 0.12 month Number of 54,000 Visits 43,200 visits Total expected C. 90,000 visits 77,200 visits Revenue II. Assumptions A. FFS $25 per visit $28 X 36,000 Expected visits X 34,000 $900,000 $952,000 B. Capitated lives 3 PMPM 2.75 Actual member X 360,000 X 360,000 months $1,080,000 $990,000 Total expected C. $1,980,000 $1,942,000 revenues Cost III. Assumptions A. Variable costs: $1,200,000 $1.242.000 Labor (48,000 hours at (46,000 hours at $25/hour) $27/hour) 150,000 126,000 (90,000 Supplies (100,000 units x units at $1.50/unit) $1.40/unit) Total variable $1,350,000 $1,368,000 costs Variable cost $15 $17.72 per visit B. Fixed costs: Overhead, plant, and $500,000 $525,000 equipment Total Expected C. $1,850,000 $1,893,000 Costs Pro-forma Profit IV. and Loss (P&L) Statement Revenues: FFS $900,000 $952,000 Capitated 1,080,000 990,000 Total $1,980,000 $1,942,000 Costs: Variable: FFS $540,000 $602,487 Capitated 810,000 765,513 Total $1,350,000 $1,368,000 Contribution $630,000 $574,000 margin Fixed Costs 500,000 525,000 Projected $130,000 $49,000 Profit 1. Construct Carroll's flexible budget for 2011. 2. What are the profit variance, revenue variance, and cost variances? 3. Consider the revenue variance. What is the component volume variance? The price variance? 4. Break down the cost variance into labor, supplies, and fixed costs variances. 5. Provide brief analysis of your results, focusing on the most significant variances. Ling Supply, a family-owned durable medical equipment store, began January with $10,200 cash. Management forecasts that collections from credit customers will be $11,700 in January and $15,000 in February. The store is scheduled to receive $7,000 cash on a business note receivable in January. Projected cash payments include inventory purchases ($14,500 in January and $13,900 in February) and selling and administrative expenses ($2,900 each month). Ling Supply’s bank requires a $10,000 minimum balance in the store’s checking account. At the end of any month when the account balance falls below $10,000, the bank automatically extends credit to the store in multiples of $1,000. Ling Supply borrows as little as possible and pays back loans in quarterly installments of $2,500, plus 5% APR interest on the entire unpaid principal. The first payment occurs three months after the loan. Requirements 1. Prepare Ling Supply’s cash budget for January and February. 2. How much cash will Ling Supply borrow in February if collections from customers that month total $14,000 instead of $15,000?

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