FINANCIAL MANAGEMENT

Financial Management for Human Service Managers

Financial Management for Human Service Managers

Week Six: Budgets and Pricing

Calculating Fixed Costs, Variable Costs, and Break-Even Point for a Program

Average Customers:

2002

$5,962

2003

$6,821

2004

$11,822

Total

$24,605.00

No. of Years

3

Average Customers

$8,201.67

Average Revenue per Unit:

2002

$1,165,065

2003

$1,244,261

2004

$2,191,243

Total

$4,600,569

No. of Years

3

Average Revenue

$1,533,523

Average Customers

8202

Average Revenue per Unit

$187

Average Variable Cost per Unit

Variable Cost includes payroll and benefits, supplies, Other and Management

2002

$1,011,008

2003

$1,142,681

2004

$1,798,131

Total

$3,951,820

No. of Years

3

Average VC per Unit

$1,317,273

Average Customers

8202

Average VC per Unit

$161

Fixed Cost:

Fixed Cost includes rent, utilities and telephone

Average Fixed Cost

$174,000

Breakeven Point

Breakeven = Fixed Cost / (Average Revenue per unit - Average VC per unit)

Breakeven

$174,000.00

(187 - 161)

Breakeven

$174,000.00

$26

Breakeven

6599

Customers

Break-even point

The accountant must be conscious and aware of certain things that are necessary, such as water and air, not just a person who made ??the rights and obligations of the company that operates and is also not a person who demonstrates financial results reached by the organization. But the accountant thought and planning and control in addition to the above. And surprisingly, many people do not realize or understand the concept of break-even point (Drury, 2007).

Break-even point

Break-even point defines what should be the volume of sales to break even venture to work, could cover all its costs, without receiving profit. In turn, both a change in revenue is growing earnings shows operating leverage (operational leverage). Break-even point is of great importance to the issue of the viability of the company and its solvency. Thus, the degree of excess of sales over the break-even point defines the stock of financial strength (stability margin) business (Maskell, 2003). The break-even point of the tools used in the planning of the profits, and break-even point can be defined as "the point at which revenues equal total costs with the overall". In other words, and the point at which they do not achieve any profit entity means the profit is equal to zero and in the case of the organization to one unit increase in profits, they bring before reaching this point, the loss-making organization.

Week Nine: Analyzing Financial Statements

Ratio Analysis

2003

2004

Current Ratio

Total Current Asset / Total Current Liability =

$82,058

0.87

$302,902

0.90

$93,975

$337,033

     

Long-Term Solvency Ratio     

Total Assets / Total Liabilities =

$359,863

1.38

$699,004

2.06

$259,979

$338,937

     

Contribution Ratio

Largest revenue source / total revenue =

$632,889

0.51

$1,078,837

0.49

$1,244,261

$2,191,243

Management Expense Ratio

Management Expense / Total Expense =

$371,101

0.28

$445,819

0.23

$1,316,681

$1,972,131

Program Expense ratio

Program Expense / Total Expense =

$945,580

0.72

$1,526,312

0.77

$1,316,681

$1,972,131

Revenue/Expenses ratio

Total Revenue/Total Expenses =

$1,244,261

0.94

$2,191,243

1.11

$1,316,681

$1,972,131

Importance of Ratio

The current ratio is used to determine the liquidity of a private nonprofit human service agency. This ratio expresses the number of times that the current assets can cover current liabilities, and the more this ratio indicates that the Company's ability to confront the dangers of sudden pay current liabilities without the need to liquidate any fixed assets or access to new borrowing (Vandyck, 2006). However, we go back to point out that the rate cannot be ...