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    Description of Cost Management

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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

    I need step by step calculations.

    1. Identify which costs you think are likely to be discretionary or committed costs.
    2. One possibility is to eliminate all discretionary costs. What do you think of this recommendation?
    3. 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.
    I need step by step calculations for #s 1 and 2.

    1. Identify which costs you think are likely to be discretionary or committed costs. The costs can be separated based on these definition.

    Committed cost ~ ...

    Solution Summary

    The solution is 391 words of explanation, definitions and calculations.

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