General Assignment 2

STUDENT NAME: _______________________________________

Section ______________________________91_______________

QUESTION I – CONCEPTUAL QUESTION ………………..…………..…… 60 points

QUESTION II – COMPUTATIONAL QUESTION……………………………………. 80 points

QUESTION III – CASE ANALYSIS – OMEGA RSEARCH INSTITUTE …. 60 points

TOTAL …………………………………………………………. 200 points

Submit the response to all parts in one document with all exhibits included in the same document (as an Adobe .pdf file or WORD document). If you use the EXCEL template provided, print out the worksheet properly formatted and insert into a .pdf document or insert into WORD.

The final document is to be submitted into the UNIT 11 DROPBOX by the deadline for the final exam.

QUESTION 1 – CONCEPTUAL QUESTION (60 points)

Legislative bodies typically adopt one of the following types of budgeting models:

(1A) Line Item Budgeting;

(1B) Program Budgeting, and

(1C) Zero-Base Budgeting.

Using whatever sources you choose (but making sure that you cite the sources in full), describe these alternative models and their PROS and CONS in as much detail as you can.

(1A) Line Item Budgeting;

(1B) Program Budgeting

(1C) Zero-Base Budgeting.

QUESTION II – COMPUTATIONAL CONCEPTS (80 points)

The following budget figures are provided by the Wilburtown Health Clinic, a unit funded through legislative appropriations from the State of New Jersey, and required to follow a line-item budgeting approach. This outpatient healthcare facility has a maximum daily capacity of 100 full-day equivalent (FDE) patients per 8-hour shift. Assume that patients overflow from one shift to the next shift, with only the first shift available for low volumes, and extra shifts added only when necessary.

NOTE: (1) FDE = total number of patients treated equivalent to full-day treatment, e.g., average of 800 patients treated for 1 hour each = 100 FDE patients.

(2) Total patient days per year = Average daily FDE patients (for all 3 shifts) x Number of days clinic is open per year .

BUDGET INFORMATION FOR 20xx

Line Item	Cost Behavior	Budgeted Costs
Nurses	Step function First 3 nurses can provide service for up to 6,000 patient-days per year. Each subsequent nurse hired can provide service for 2,000 patient-days per year. No fractional or part-time nurses are employed.	Average annual salary (per nurse) of $65,000 for first three nurses. (This includes fringe benefits). Subsequent nurses hired will be paid annual salaries of $60,000 each (including fringe benefits).
Medical supplies	Variable cost	$5 per patient-day up to 5,000 annual patient-days; this decreases to $4 per patient-day thereafter
Staff Physicians (full-time)	Fixed There are 3 physicians on staff for the first shift, and another three for the second shift. The third shift uses only physicians on call.	$300,000 per year for each physician (including fringe benefits).
Physicians on call	Variable (used during Shift 3 for only the actual patient-days serviced)	The billing rate is $100 per patient-day during Shift 3.
Maintenance of facilities	Semi-variable	$100,000 fixed; $2,000 per day for each shift.
Depreciation	Fixed	$2 million per year
Other expenses	Semi-variable	$500,000 per year plus $10 per patient-day

The health center is open 240 days a year. The three shifts are

1st shift – from 9 AM – 5 PM. 2nd shift – from 5 PM – 1 AM. 3rd shift – from 1 AM to 9 AM.

REQUIRED:

Question II (A) – 60 points

Using the template below, prepare an annual line-item budget for Wilburtown Health Clinic. You may use the EXCEL template provided if you wish, but this is optional.

Cost	60 patients per day (average) 14,400 patient-days per year	130 patients per day (average) ?	250 patients per day (average) ?
Medical supplies
Physicians on Call
Maintenance of Facilities
Nurses
Other expenses
Staff Physicians (full-time)
Depreciation
TOTAL BUDGETED EXPENSES

Question II (B) – (20 points):

(i) Using the high-low method, estimate the cost function for Wilburtown Health Clinic.

(ii) Using the cost function you estimated in (i) above, forecast the total budgeted costs to be expected if Wilburtown Health Clinic is operating at full capacity of 72,000 patient days per year.

QUESTION III – OMEGA RESEARCH INSTITUTE

(see the last case in the Case Packet for Spring 2018 – 60 points)

PART III (A) 30 points

Prepare a list of the problems associated with the Ormico project by classifying them into the following categories.

(Note that the classifications don’t matter as much as correctly identifying the problems. You will not be penalized for misclassification errors).

A1. Strategy Formulation (kinds of projects suitable, time horizon, etc.)

A2. Management Control system (e.g, performance measurement systems, motivation systems, conflict management, client management, lines of responsibility, etc.)

A3. Task/Performance Control (communication procedures with client, internal communication processes, output/outcome measurement systems, etc.)

PART III (B) – 30 points

What changes should Dr. Simmons recommend to avoid similar problems in the future? Your recommendations should tie in to the problems you identified in Part III (A.)

B1. Strategy Formulation

B2. Management Control system

B3. Task/Performance Control