- 15 Marks
MA – L2 – Q15 – Budgetary Control
Question
A private medical practice based near Mount Adaklu has five full-time doctors, five full-time assistants, and two administrators.
Each doctor treats 18 patients each day on average. The medical centre is open for five days each week, 46 weeks each year.
Charges for patients vary according to the age of the patient and the nature of the treatment provided.
Charges
| Adults below 65 years of age | Children and individuals aged 65 years and over | |
|---|---|---|
| No treatment: consultation only | GH¢50 | GH¢30 |
| Minor treatment | GH¢200 | GH¢120 |
| Major treatment | GH¢600 | GH¢280 |
The patient mix and the treatment mix are as follows:
Patients:
- Adults: 45%
- Children: 25%
- Over 65 years old: 30%
Treatment:
- No treatment: 20%
- Minor treatment: 70%
- Major treatment: 10%
The salary of each doctor is GH¢240,000, assistants earn GH¢100,000, and administrators earn GH¢80,000. In addition, everyone receives a 5% bonus at the end of the year.
The medical practice expects to pay GH¢414,300 for materials next year and other (fixed) costs will be GH¢733,600.
Required:
Using the information provided, present a statement of profit or loss for the medical practice for next year. (Ignore the effects of inflation.)
Answer
Budgeted statement of profit or loss for the year
| GH¢ | GH¢ | |
|---|---|---|
| Revenue: | ||
| Adults: | ||
| No treatment | 93,150 | |
| Minor treatment | 1,304,100 | |
| Major treatment | 558,900 | 2,056,050 |
| Children: | ||
| No treatment | 31,050 | |
| Minor treatment | 434,700 | |
| Major treatment | 144,900 | 610,650 |
| 65 years and over: | ||
| No treatment | 37,260 | |
| Minor treatment | 521,640 | |
| Major treatment | 173,880 | 732,780 |
| Total revenue | 3,399,480 | |
| Expenses: | ||
| Salaries: | ||
| Doctors (5 × GH¢240,000) | 1,200,000 | |
| Assistants (5 × GH¢100,000) | 500,000 | |
| Administrators (2 × GH¢80,000) | 160,000 | |
| Bonuses (5% of total salaries) | 93,000 | 1,953,000 |
| Materials | 414,300 | |
| Other fixed costs | 733,600 | |
| Total expenses | 3,100,900 | |
| Net profit | 298,580 |
Workings
Total number of patients per year = 5 doctors × 18 patients per day × 5 days per week × 46 weeks per year = 20,700.
| Total | Adults (45%) | Children (25%) | 65 years and over (30%) | |
|---|---|---|---|---|
| Patients | 20,700 | 9,315 | 5,175 | 6,210 |
| Treatment: | ||||
| None: 20% | 1,863.0 | 1,035.0 | 1,242 | |
| Minor: 70% | 6,520.5 | 3,622.5 | 4,347 | |
| Major: 10% | 931.5 | 517.5 | 621 |
Revenue:
- Adults, no treatment: 1,863 × GH¢50 = GH¢93,150
- Adults, minor treatment: 6,520.5 × GH¢200 = GH¢1,304,100
- Adults, major treatment: 931.5 × GH¢600 = GH¢558,900
- Children, no treatment: 1,035 × GH¢30 = GH¢31,050
- Children, minor treatment: 3,622.5 × GH¢120 = GH¢434,700
- Children, major treatment: 517.5 × GH¢280 = GH¢144,900
- 65 years and over, no treatment: 1,242 × GH¢30 = GH¢37,260
- 65 years and over, minor treatment: 4,347 × GH¢120 = GH¢521,640
- 65 years and over, major treatment: 621 × GH¢280 = GH¢173,880
- Topic: Budgetary Control
- Uploader: Salamat Hamid