Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future, but increasing demand for services. In order to plan for reduce budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.
Program Area Costs
* Administrator $60,000
* Assistant $35,000
* Two Secretaries $42,000
Advertising and promotion $9,000
Professional meetings/dues $14,000
* Accounting and billing $15,000
* Custodial $13,000
* Security $12,000
* Consulting $10,000
Community Mental Health Services
Salaries ( two social workers) $46,000
Outpatients mental health treatment
*Two Social Workers $70,000
1. Give a dollar range of costs to reduce budgets ( worst and best case analysis).
2. You need to cut $94,000 in cost. Prioritize those cuts that can be made without impacting the operation or quality care of the organization.
3. How would you advise Dr. White to prepare for reduced budgets?
[Solution also available in Word for clearer formatting.]
1. Give a dollar range of costs to reduce budgets (worst and best case analysis).
In the worst case situation, it means that the budgets have been cut to the extent that Dr. White could keep only the necessary and most critical services as follows: -
*One Secretary $21,000
Advertising and promotion 0
Professional meetings/dues 0
*Accounting and billing $15,000
Community Mental Health Services:
Salary (one social worker) $23,000
Outpatient mental health treatment
*One Social Worker $35,000
In the best case analysis, we expect that there would be only some costs of the services, which will not affect the qualities of the services provided by the clinic to the community will be cut as follows: -
This solution finds where costs can be cut and ranks the importance of the different cuts in order to make a new budget plan. Attached as 2 pages in Word with tables.