Patton-Fuller Community Hospital Operation Budget Analysis Caterina Hossack, the Chief Nursing Officer is proposing for the PFCH ? ("Patton-Fuller Community Hospital") (Patton-Fuller Community Hospital, 2010 p 1) ? To hire additional nursing staff because she believes that the policy will enhance quality of services. Presently, the Patron-Fuller hospital is maintaining

nursing ratio, which is 5 patients for every nurse. The argument of Caterina is that nurses have been overworked, and the issue is having negative effects on patient's care. By consequence, some nurses have left the PFCH for other hospitals. Based on the memo sent by Caterina to the President/CEO, the President has asked the Chief Financial Officer to prepare the financial data to compare whether giving nurses more raise vs. hiring additional nurses can solve the problems.

Objective of this paper is to prepare 2010 Operating Budget based on the labor decision selected from the Nursing Statistics memo?.

PART 1

The report chooses the policy decision to raise wage of nurses by $1 per hour. A raise will reduce the costs of operations compared to hiring additional nurses, which will skyrocket the costs of operations.

The table 1 reveals the costs of raising the nurse's wages vs. hiring additional nursing staff. The stimulation in the table 1 reveals that the PFCH will benefit from raising the wages of nurses rather than hiring additional nursing staff or reducing nursing- patient ratio from 1-to-5 to 1-to-4.

Table 1: "Simulation Effect of a $1 per hour raise for all nurses"

Jan

Feb

Mar

Apr

May

Jun

Total

"Number of Patients ?per- day"?

"Cost -of -nurse per hour w/benefits" $31.00

$31.00

$31.00

$31.00

$31.00

$31.00

Cost- of- nurse per 24 hour day?

$744.00

$744.00

$744.00

$744.00

$744.00

$744.00

"?Number of nurses per patient "5 to 1" nursing ratio ?"

0.2

Number of nurses -per -day

85.6

85.6

79.3

67.8

58.7

48.4

Nursing- cost per -day

$63,703

$63,680

$58,973

$50,448

$43,641

$36,001

Nursing -cost per- month

$1,974,781

$1,783,050

$1,828,163

$1,513,444

$1,352,862

$1,080,034

"Increase in cost per month based on $1 raise per nursing- hour?"

$63,702.62

$57,517.73

$58,973.00

$48,820.77

$43,640.71

$34,839.80

$307,494.63

"Increase in cost per month by changing nursing ratio from 5- to- 1 to 4 ?to- 1?"

$477,770

$431,383

In other words, budget serves as a financial framework that can be used to make a decision on a course of action a company intends to implement. A business is required to control expenditures in order to effectively manage its operations. In the case of the Patton-Fuller Hospital, preparing operating budget is very critical to assist the organization to make a decision on whether to hire additional nursing staff or raise the wages of nurses by $1 per hour. The outcome of the operating budget will assist the board to make a decision whether to raise the nursing staff or hire more nurses to reduce the patients nursing ratio to 4 to 1.
Role of variance analysis for an operating budget

Variance analysis is the strategy of applying a quantitative investigation in order to determine the difference between planned and actual operating budget. One of the benefits of the variance analysis is to assist in controlling operating budget. More importantly, variance assists an organization to monitor budget performances because it will assist in comparing the current results with expected results. For example, if the net profits are too…