Managerial accounting

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Part 1 DELIVERABLE LENGTH: 1-2 PAGES

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

1. Give a dollar range of costs to reduce budgets (worst and best case analysis).
2. 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.
3. How would you advise Dr. White to prepare for reduced budgets?

PART 2 DELIVERABLE LENGTH 4 PARAGRAPHS

You have been asked to speak about the topic of responsibility centers to a group of executives at a conference.

For this speech you should select a company/business that you are familiar with and briefly describe it. Give three examples of responsibility centers in that business. Describe how these responsibility centers interact.

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...ost. As such, all the items are important and have to expend on, but there are some whose cost can be reduced by a much higher amount as compared to other items (Kemp & Dunbar, 2003).

For example, the cost of salaries of the social workers can be cut down by a large amount in comparison with the salaries of the administrator and assistant. In the cost of the purchased services, roughly a 10% reduction has been done because they are not directly related to the operations. Similarly, transportation is also not directly associated with the offering of the quality care and the effective operation of the agency. The advertising expenses can be cut down significantly because it is the quality of services that influences the sales most significantly and not the advertising. Moreover, the supplies and professional meetings have been reduced by 10%.

Reduced Budget

In order to formulate a reduced budget for the company, the Chief Administrator must ascertain the different kinds of standards that are to be implemented. She should evaluate the trend of the behavior of cost in reaction to the previous level activity. An inclusive analysis of several costs should be made before making any decision in relation to cutting down of the total cost of the agency, so that its effect on the operation of the agency can be easily assessed.

Conclusion

Thus, a range of costs has been provided to reduce the budgets; for this, the best and worst case analysis have also been provided. The amount of $94,000 has been reduced from the budget to reduce the cost and these reductions have been prioritized according to their importance in the organization. These reductions will not have any affect on the functioning of the company.

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References

Kemp, S. & Dunbar, E. (2003). Budgeting for managers. McGraw-Hill Professional.

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