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    MANAGERIAL ACCOUNTING

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    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 reduced 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
    Administration
    Salaries:
    Administrator
    $60,000
    Assistant
    $35,000
    Two Secretaries
    $42,000
    Supplies $35,000
    Advertising and promotion $9,000
    Professional meetings/dues $14,000
    Purchased Services:
    Accounting and billing
    $15,000
    Custodial
    $13,000
    Security
    $12,000
    Consulting
    $10,000
    Community Mental Health Services
    Salaries (two social workers) $46,000
    Transportation $10,000
    Outpatient mental health treatment
    Salaries:
    Psychiatrist
    $86,000
    Two Social Workers
    $70,000

    Give a dollar range of costs to reduce budgets (worst and best case analysis).

    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.

    How would you advise Dr. White to prepare for reduced budgets?

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    Solution Preview

    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 reduced 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
    Administration
    Salaries:
    *Administrator $60,000
    *Assistant $35,000
    *Two Secretaries $42,000
    Supplies $35,000
    Advertising and promotion $9,000
    Professional meetings/dues $14,000

    Purchased Services:
    *Accounting and billing $15,000
    *Custodial $13,000
    *Security $12,000
    *Consulting $10,000

    Community Mental Health Services:
    Salaries (two social workers) $46,000
    Transportation $10,000

    Outpatient mental health treatment
    Salaries:
    *Psychiatrist $86,000
    *Two Social Workers $70,000
    Total $457,000

    Give a dollar range ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer how would you advise Dr. White to prepare for reduced budgets.

    $2.19