Damex medical centre which operates three clincs is in the process of preparing its budget for the coming financial year. Budgeted information for the coming year is as follows:
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General unallocated costs:
Staff pension $50,000
Depreciation â€“ Equipment $36,000
– Motor Vehicles $48,000
The following additional information is available on each clinic for the same period:
South Clinic North Clinic Central Clinic
Direct Allocated Overheads:
Insurance $20,000 $24,000 $12,000
Heating and Lighting $20,000 $30,000 $10,000
Equipment $120,000 $160,000 $80,000
Motor Vehicles $160,000 $200,000 $120,000
Patients and Income Levels:
Number of patients treated 2,000 3,000 1,000
Income $500,000 $550,000 $220,000
Number of Employees:
Doctors 4 4 2
Nurses 3 4 2
Medical assistants 2 3 1
(i) Each doctor is paid a salary of $50,000 per annum; each nurse is paid $25,000 per annum and each medical assisant is paid $15,000 per annum.
(ii) The unallocated costs should be apportioned as follows:
– Staff pension should be based on the number of employees;
– Depreciation of Equipment should be based on the value of equipment
– Depreciation of Motor Vehicles should be based on the value of motor vehicles.
(a) Produce a report for management showing:
(i) The total cost of operating each clinic.
(ii) The profit or loss made by each clinic.
(iii) The profit per patient for each clinic.
(b) Comment on the importance of the report you have presented above. Your comments should highlight any weaknesses in your report.