Page 8 - CIMA MCS Workbook February 2019 - Day 2 Suggested Solutions

CIMA FEBRUARY 2019 – MANAGEMENT CASE STUDY

There would be limitations in terms of non‐standard procedures being analysed in this way, but
they could still be looked at on a total basis for analysis.

Practice profitability analysis

As the business has 30 separate practices and is continuing to grow, analysing profitability by
practice could be very useful.

It would allow us to make comparisons between practices and could tell us which are the best and
worst performing ones. This would allow us to target particular practices for improvement, so
that we can maintain our high standards, not just in patient service, but in profit generation too.

Analysing practices in this way could lead to resentment from the managers of some of them, but
most, particularly those run by owners of the business, should appreciate the need to improve
profitability where performance is lacking.

Break‐even analysis

It is suggested that if dentists are able to bill V$390 per hour or V$2900 per day then they will
earn an acceptable profit.

Break‐even analysis would look at the minimum that would need to be earned in order not to
make a loss. This could be a useful additional analysis, especially as a way of setting targets for
underperforming practices. If they are not meeting the break‐even point then remedial action
could be taken by the company.

Financial Manager

98 KAPLAN PUBLISHING