1. Throughout this course, you’ve examined the importance of
anticipating financial fluctuations that may impact your
organization’s ability to provide services. While financial
managers have no time machines or crystal balls, they
do
have expense forecasts. Expense forecasting is one of the
preeminent tools that financial managers can use to prepare
their organizations for future fiscal turbulence. In this
Assignment, you will examine a scenario and generate a
corresponding expense forecast in Excel.
Before pursuing an opportunity or making a major purchase,
financial decision makers must first ascertain if the
expenditures are justified. Determining whether a new process,
system, or purchase will yield worthwhile returns is no easy
task. However, managers have a variety of tools to help them
decide whether the new expenditure is warranted. Analyzing a
venture’s benefit/cost ratio, marginal profit and loss statement,
and break-even points enable nurse managers to make educated
decisions about how they choose to commit their funds.
Note:
For those Assignments in this course that require you to
perform calculations you must:Use the Excel spreadsheet
template for the Week 3 assignment
Show all your calculations and formulas in the spreadsheet.
Answer any questions included with the problems (as text in the
Excel spreadsheet).

2. Expense Forecasting
In this Application Assignment you calculate scenarios focusing
on benefit/cost ratio analysis, marginal profit and loss
statements, and break-even analysis. For these scenarios, you
will utilize the provided figures to perform calculations and
then make recommendations about the viability of the
investment opportunities
Expense Forecasting Scenario
Your department has performed 20,000 procedures during the
first six months (January–June) of 20X1. Spending during that
period of time was $210,000 for fixed expense items and
$1,200,000 for variable expense items. Of those amounts,
$50,000 of fixed expense money was spent on preparing for a
Joint Commission survey. Volume is anticipated to be 10%
higher in the second half of the year. On November 1st, two
new procedure technicians will begin work. The salary and
fringe benefit costs for each are $96,000/year. Based on the
information provided, prepare an expense forecast for 20X1.
Annualization for Fixed: (Adjusted Total for Year to Date
Expense/6) * 12 =Total Annualized Amounts
Annualization for Variable (Adjusted Total for Year to Date
Expense/ 20,000) * 40,000 =Total Annualized Amounts.
Financial Analysis Cycle
Marginal Profit and Loss Statement Scenario
You are examining a proposal for a new business opportunity –
a new procedure for which demand is expected to be 1,400 units
the first year, growing by 600 units a year thereafter. The price
charged per procedure is $1,000. The collection rate is

3. anticipated to be 80%. Each procedure consumes $300 of
supplies. Salary cost is estimated to cost $540,000 each year,
fringe benefits are 25% of salaries, rent for the facility is
$55,000/yr and operating cost are $120,000/yr.
Questions
:
Develop a marginal profit and loss statement for this business
opportunity.Based on that analysis, should this opportunity be
pursued?
Break-Even Analysis Scenario
You can charge $1,075 for a new service. Demand is anticipated
to be 8,000 units a year. Your business is able to handle up to
16,500 units annually, so capacity should not be a problem. The
average collection rate is 80%. The new service has annual
fixed costs of $4,700,000. Variable cost per unit of service is
$420.
Question
: Use break-even analysis to determine if this new service is
financially viable. If the business is not financially viable, what
steps could you take to make a case to proceed with
implementation? Explain your decision.
Benefit/Cost Ratio Analysis Scenario
You are considering the acquisition of a new piece of equipment
with a useful life of five years. This new technology will make
your clinical operation more efficient and allow for a reduction
of 10 FTEs. The equipment purchase price is $4,500,000 plus
10% installation fee. The purchase price includes service for the

4. first year, an item that has an annual cost of $10,000. There is a
potential for additional volume of 150,000 units in the first
year, growing by 30,000 each year thereafter. The price charged
per unit is $15.00 with a 50% collection rate. The staff being
eliminated are paid $12.50 per hour. The fringe benefits rate is
20%. The hurdle rate is 7.5%.
Questions
: After reviewing Dr. Ward's Video and the calculations below,
please answer the following questions:
What is meant by benefit/cost ratio, average payback period
and ROI and why are the all important to understand when
purchasing new equipment?
Based on this information, would you pursue this opportunity?
Explain your decision in 250-500 words in the text box below.
References:
Baker, J. J., Baker, R. W., & Dworkin, N. R. (2018).
Health care finance: Basic tools for nonfinancial managers
(5th ed.). Burlington, MA: Jones and Bartlett Learning.
Chapter 14, “Trend Analysis, Common Sizing, and Forecasted
Data” (pp. 149-160)
The focus of this chapter is the use of trend analysis and
forecasting to develop future budgets and make financial
decisions about capital purchases, programs, and personnel.

5. Chapter 15, “Using Comparative Data” (pp. 161-173)
In this chapter, you are introduced to the criteria for identifying
other health care organizations that are comparable to your own.
Data from these organizations can then be used to evaluate your
own organizational performance.
Chapter 19, “Estimates, Benchmarking, and Other Measurement
Tools” (pp. 223-231)
In this chapter, you continue exploring the concept of financial
benchmarking. The chapter focuses on the importance of
benchmarking for identifying performance gaps.
Zelman, W., McCue, M., & Glick, N. (2009). Financial
management of health care organizations: An introduction to
fundamental tools, concepts, and applications (3rd ed.).
Hoboken, NJ: Jossey-Bass.
Retrieved from the Walden Library databases.
Chapter 5, “Working Capital Management” (pp. 187–231)
This chapter examines the concept of working capital. The
authors explore the specifics of current assets and the
management of the working capital cycle.
Chapter 11, “Responsibility Accounting” (pp. 468–497)
Review: This chapter explores the trend toward the
decentralization of health care organizations and the challenges
this presents. This chapter also describes responsibility centers,
or organizational units intended to achieve specific tasks.
Mulva, S., & Dai, J. (2009) Health care facility benchmarking.

6. HERD, 3
(1), 28–37.
Reprinted by permission of Sage Publications via the Copyright
Clearance Center.
This article describes a national health care facility’s
benchmarking program. It is designed to compare measures of
capital project performance.
Agency for Healthcare Research and Quality. (2013). Measuring
and benchmarking clinical performance. Retrieved
from www.ahrq.gov
Ettorchi-Tardy, A., Levif, M., & Michel, P. (2012).
Benchmarking: A Method for Continuous Quality Improvement
in Health.
Healthcare Policy
, e101-e119. Retrieved
fromhttp://www.ncbi.nlm.nih.gov/pmc/articles/PMC3359088/