Budget and Sensitivity Analysis
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Dr Stephanie White the chief Administrator of Uptown Clinic ,a community mental health agency, is concerned about the the dilemna of coping with reduced budgets next year and into the foreseeable future ,but increasing demand for services. In order to plan for reduced budget ,she must first identify where costs can be cut or reduced and still keep the agency functioning.
Program area and costs :administrator =$60,000;assistant=$35,000;two secretaries=$42,000;supplies=$35,000;advertising and promotion=$9,000;professional meetings/dues=$14,000. Purchases services:accounting and billing=$15,000; custodial=$13,000; security=$12,000;consulting=$10,000 .Community mental health services:Salaries(2socialworkers)=$46,000; transportation=$10,000. Outpatient mental health treatment :salaries: psychiatrist=$86,000;2 social workers=$70,000.
1-Give a dollar range of costs to reduce budgets(worst and bestcase analysis).
2-You need to cut $94,000 incost .Prioritize those cuts that canbe made without impacting the operation or quality care of the organization.
3-How would you advise Dr White to prepare for reduce budgets.
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The solution includes a word document and an excel sheet that show calculations and address the problem requirements and explain the difference between discretionary and committed costs.
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To be able to answer the questions and decide on costs that could be cut, we must divide costs into discretionary and committed costs. Discretionary Fixed Costs (also known as Managed Fixed Costs) usually arise from annual decisions by management to spend in certain fixed costs. There are basically 2 differences between Discretionary and Committed Fixed Costs; 1) The planning horizon for Discretionary Fixed Costs is fairly short-term, usually a single year; and 2) Discretionary Fixed Costs can be cut for short periods of time with minimal ...
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- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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