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LABORATORY BUDGET
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ASSET VS. EXPENSES
KEY TERMINOLOGIES
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CAPITAL EXPENDITURES (CAPEX)
VSREVENUE EXPENDITURES (OPEX)
KEY TERMINOLOGIES
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WHAT IS BUDGETING
The process of planning,
forecasting, controlling, andmonitoring the financial
resources of the organization
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IMPORTANCE OF BUDGETING
For OPEXTo anticipate the sources (income)
and uses (expenses) of funds in
short period of time or within one
year
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IMPORTANCE OF BUDGETING
For CAPEXTo determine what kind of assets are
needed by the company and the
capacity or ability of the company to
purchase such assets
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OPERATIONAL BUDGETING (OPEX)
Flexible budgetingZero-based budgeting
CAPITAL BUDGETING (CAPEX)
TYPES OF BUDGETING
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I. THE OPERATIONAL BUDGET
The process of planning for the
laboratory as an ongoing businessconcern; accounting for everyday
needs and expenditures
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I. THE OPERATIONAL BUDGET
Flexible Budgeting: A budgetingprocess that attempts to set
expenditures based on a variable
workload volume
Zero-Based Budgeting: A methodthat analyzes needs based on
prioritizing of goals and objectives
and not on past allocations
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1. Time Frame the annual budget, whichcovers 1 year or budget cycle, is themain working guidelines for
management.
OPERATIONAL BUDGET PREPARATION
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2.Forecasting Stage factors:i. Shifts in patient mix or volume
ii. Changes in medical staff compositioniii. Changes in business parameters such as
inflation and reimbursement rates
iv. Expansion or cutbacks in services offered by
the hospital or laboratory
v. Population fluctuations brought about by
changes in the local economy
OPERATIONAL BUDGET PREPARATION
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3. Scheduling Stage when budget isprepared.
OPERATIONAL BUDGET PREPARATION
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4. Synthesis of information how thefinancial information is organized is
very important. The budget report isorganized into three parts:
i. Revenue and volume figures
ii. Itemized cost categories
iii. FTEs and labor hours
OPERATIONAL BUDGET PREPARATION
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OPERATIONAL BUDGET (Income vs. Expenses)
Service Income
Complete Blood Count (P120 x 12,000px)P1,440,000
Routine Urinalysis (P100 x 6,000px) 600,000
Routine Fecalysis (P100 x 3,600px) 360,000 P2,400,000
Less: Cost of Service
Reagents (P50 x 12,000units) P600,000
Syringe (P350 x 120 boxes) 42,000
EDTA Tubes (P450 x 120 boxes) 54,000
Plastic cups (P50 x 192 packs) 9,600
Salaries and Wages (P20,000 x 12 mos) 240,000 945,600
Gross Margin P1,454,400
ILLUSTRATION
(PRO-FORMA INCOME STATEMENT)
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OPERATIONAL BUDGET (Income vs. Expenses)
Gross Margin P1,454,400
Less: Operating Expenses
Utilities Expense P 43,000Advertising Expense 10,000
Rent Expense 100,000
Repairs and Maintenance 50,000
Office Salaries 180,000
Insurance Expense 4,500Depreciation Expense 50,000 437,500
Net Income before taxes P1,016,900
Less: Tax Expense 305,070
Net Income P 711,830
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ILLUSTRATION
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CAPITAL BUDGETINGTwo types of analysis:1. Narrative description: includes awritten justification of the project and a
prioritization of the competing
proposals.
i. Justification a detailed rationale for arequest; why the project is needed, how itwill benefit the laboratory, and why it
should be considered over competing
projects.
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ii. Prioritization an additional step injustification is to prioritize the project,
both in the time frame and in relation to
other requests; capital budget forms are
scaled according to rank priority
iii. Opportunity Costs the value of what isgiven up to pursue another project, itmust be part of the overall decision
making process
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CAPITAL BUDGET
2 Computer Units @ P30,000 each P 60,000
1 Microscope @ P120,000 each 120,000
Total Capital Expenditure for 2013 P180,000
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ILLUSTRATION
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2. Quantitative techniques : use to determinethe financial feasibility of the project.
Methods used are:
i. Payback Period the length of time it will taketo recover the cash outlays for a project.
ii. Average Rate of Return the average yield overthe life of an investment
iii. Net present Value (NPV) the worth of futureearnings at todays rates; Time Value of Money
the future value of a dollar compared with today
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iv. Internal Rate of Return The ratio ofcash flow and cost-of-capital factors to
the amount of investment requiredv. Required Rate of Return A bottom-linelevel of income required by a company
before any project is considered.
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