Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 41

Budget Cuts Pharmacy Health Services at Overland University provides certain medications to students free of charge. Currently, 40 percent of the pharmacy’s costs are fixed; the other 60 percent are variable. The pharmacy’s budget was $300,000 last year, but the university recently cut this year’s budget by 10 percent.

Required What is the percentage decrease in the amount of services the pharmacy can provide this year?

Step 1 of 5

Budgets

Budgets are forecast by the company for the upcoming year giving them an idea of the probable costs and revenues so that they can plan better. Budgets help in effective planning and controlling of the expenditure.