Budgeting, Costing and Casemix - Essay Example

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Budgeting, Costing and Casemix

as the NPV is less than zero so it is not advisable for the university to invest in this project. Had the NPV been greater than zero it would make sense to invest in this venture. Question Five Part (a) The state of revenues and expenses for the hospital are as shown in the table below: Revenues Direct Indirect 16 5.5 1.5 5 3.3 3.8 6 2.8 1.6 - - 4.4 - - 2.55 27 11.6 13.85 Projected Profit 1.55 Note: All values in millions of dollars. Therefore the hospital’s projected profit for the 2010 fiscal year is $1.55 million. Part (b) The allocation of indirect costs to the patient services departments are indicated in the table below along with the agreed cost drivers. Indirect Cost Cost Driver Cost (Millions of Dollars) Financial Services Patient Revenue 1.5 Maintenance Space Utilisation 3.8 Housekeeping Labour Hours 1.6 Administration Salary Dollars 4.4 Personnel Salary Dollars 2.55 The breakup of the indirect costs to each department is described below. ...Show more

Summary

Question Four The initial investment required by the university is $18,00,000 at a cost of capital of 14%. The total cash flows for the university will be as indicated in the table below: Year Cash Inflow Cash Outflow Net Return 0   1,800,000 -1,800,000 1 600,000 225,000 375,000 2 600,000 225,000 375,000 3 600,000 225,000 375,000 4 600,000 225,000 375,000 5 600,000 225,000 375,000 6 1,050,000 225,000 825,000 Net Return on Project 900,000 For the first five years the university receives $375,000 while the return for the sixth year is $825,000 while the cash outflow remains at $225,000 throughout the six years…
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