Problem 10-6
Modern Healthcare, a group practice clinic with 10 physicians, had the following income in 2014:
| Revenue |
$3,450,000 |
| Less operating expenses: |
| Salaries |
| Physicians |
$1,390,000 |
| Nurses |
150,000 |
| Nursing aide |
67,500 |
| Receptionist |
52,000 |
| Accounting services |
42,000 |
| Training |
128,000 |
| Supplies |
245,000 |
| Phone and fax |
3,250 |
| Insurance |
271,000 |
| Depreciation |
241,000 |
| Utilities |
20,000 |
| Miscellaneous |
62,000 |
| Total operating expenses |
2,671,750 |
| Income before taxes |
778,250 |
| Less taxes on income |
272,388 |
| Net income |
$505,862 |
The following changes are expected in 2015:
1. The clinic is expecting a 1 percent decline in revenues because of increasing pressure from insurance companies.
2. Physicians are planning to hire a physician assistant at a salary of $51,000 per year.
3. Training costs are expected to increase by $15,000.
4. Supplies are expected to increase to be 10 percent of revenue.
5. Phone, fax, and insurance amounts will stay the same.
6. Depreciation expense will increase by $15,000 per year, since the clinic is planning to purchase equipment for $125,000.
7. Utilities and miscellaneous expenses are expected to increase by 5 percent next year.
8. Taxes on income will be 35 percent.
Prepare a budgeted income statement for Modern Healthcare for the year 2015.