Coastal Dental is a (fictional) dental practice on the Gold Coast.
Your management accounting consulting firm has been hired by the managing director of Coastal Dental to make recommendations for improving its operations.
The following information has been gathered about the practice:
As at 31 December 2019
|Less: Accumulated Depreciation||( 90,000)|
|Liabilities & Shareholder Equity|
|Total Liabilities & Shareholders’ Equity||$275,650|
The dental surgery is located in Coolangatta and operates out of rented premises. The following table outlines the operating costs for the year.
|Utilities (Water & Electricity)||$80 / month||Paid quarterly|
|Insurance||$6 000 / year||Paid monthly|
|Lead Dentist Salary x2||$186 000 / year excluding on-costs||Paid monthly|
|Graduate Dentist x 1||$90 000 / year excluding on-costs||Paid monthly|
|Dental Assistant x 2||$60 000 /year excluding on-costs||Paid monthly|
|Administration Staff Wages||$2 500/month||Paid monthly|
|General Office Expenses||$500 /month||Paid monthly|
|Rent||$1 000 /month||Paid monthly|
|Dental supplies||$400 / month||Paid quarterly|
Salaries: There are three dentists (one who is a graduate) and two dental assistants. They are all paid an annual salary. It is estimated that their on-costs are 30% of their annual salary. They work 37.5 hours per week. Each appointment requires a lead dentist and an assistant. The graduate dentist always works along-side one of the lead dentists when they carry out the long one hour appointments.
Each employees allowance for annual leave, public holidays and sick leave amounts to 8 weeks per year. They are also given an allowance for non-billable time of 2 hours per week which includes professional development, department meetings and idle time.
Payments: It is estimated that 30% of all operating expenses will be paid in the month they are due and the remaining 70% will be paid in the following month.
Loan: The business has an interest only loan. The interest is paid monthly. The principle can be repaid at any time. The interest rate payable on the loan is 15% per annum.
Dental Equipment: Depreciation on the dental equipment totals $20,000 for the year. Depreciation is recorded monthly.
Repairs and maintenance: related to the dental equipment is estimated to be $700 each quarter payable in March, June, September, and December.
Ignore GST and Income Tax.
Expected patient visits for 2020 are indicated in the table below. 75% of the visits are expected to be half-hour appointments and the remainder will be one hours visits:
The average fees received for the two (2) different types of appointments are $90 for half an hour (30 minutes) and $205 for one hour (60 minutes).
Cash collections: Twenty per cent (20%) of each month’s professional services revenue is collected during the month when the services are rendered and the remainder is collected the month following service.
Budget Schedules & Expected Outcomes
(15 marks, weighted 50% of assignment total)
Using the information provided, prepare the following operating and financial budgets for the twelve-month period from January 2020 to December 2020.
1. Monthly Sales Revenue
2. Labour Budget (including labour cost per appointment type)
3. Monthly Operating Expense Budget
1. Budgeted Income Statement for the year ended 31 December 2020
2. Monthly Cash flow Budget
3. Budgeted Balance Sheet for the year ended 31 December 2020
Your budget spreadsheet must be submitted in Excel Format (not as an appendix in your WORD document). The first worksheet should contain your raw/input data and assumptions from this assignment overview sheet. All future worksheets should be linked to this data. Show all calculations and use Excel functions where possible. While you should use examples in your text as a guide, the key to using spreadsheets is that they are structured so that others can use them and follow the flow of information without difficulty.
Analysis & Report to Managing Directors of Coastal Dental
(15 marks, 50% of assignment total)
Write a report (Maximum 1,500 words, 10% (+/-) will be accepted with no penalty) for the managing director of the dental practice. The report should include:
§ an overview of the expected results for the 2020 year including total sales, operating expenses and expected cash position;
§ a cost-volume-profit (CVP) analysis to indicate the breakeven point (in patients and sales) and provide recommendations regarding how to improve the current margin of safety.
§ an analysis of the business operations (i.e. current incomes and expenses) and recommendations regarding how to improve the profitability of the dental practice. Use industry data (e.g. market rate for salaries) to support any recommendations for changes.
§ Use visual aids such as tables and graphs to enhance your report presentation