Making a Financial Case

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Making a Financial Case Understanding Financial Concepts Used To Inform Management Decisions 1: Understanding financial concepts used to inform management decisions 1.1: Explain the differences between capital and revenue expenditure, using examples Capital Revenue A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset. Within the Aneurin Bevan University Health Board we are governed by the ‘Financial Control Procedure – Capital Assets and Charges’ (Appendix 1).…show more content…
Overhead costs are the costs of support services that contribute to the effective running of the Aneurin Bevan University Health Board. They are costs not driven by the level of patient activity and are apportioned to service costs because there are no clear patient activity based allocation methods. Examples include the chief executive’s salary, business planning, and human resources. Within the three classifications sit: • Fixed costs • Semi-fixed costs • Variable costs Fixed, where costs are not affected by in-year changes in activity. For example in the services I manage I employ two full time and one part time Supervisor (Categorised below as Domestic Band 4). The costs for the Supervisors will not alter throughout the year as they are not covered when away from work due to annual leave or sickness. Type Subjective Description WTE Actual Annual Budget Cur Month Budget Cur Month Actual Cur Month Variance YTD Budget YTD Actual YTD Variance Pay 2M541-Domestic Band 4 2.48 77,100 6,424 6,169 (255) 51,392 51,323 (69) Semi-fixed, where costs are fixed for a given level of activity but change in steps when activity levels exceed or fall below these given levels. For example unlike the Supervisor’s, Catering, Portering and Domestic staff are backfilled when they take annual leave or on sick leave. Staffing levels can also be increased when extra demands,
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