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Bridgestone Behavioral Health Center: Cost-Volume-Profit (CVP) Analysis for Planning and Control
The Executive Director and Accountant of Bridgestone were discussing the importance of being able to understand better the operating and financial performance of the company. The company engages in providing prevention, intervention and treatment for people with substance problems. The company experienced a loss during the prior year but a profit of $7,000 is expected in the current year.
Here goes a conversation between the executive director and Accountant:
Thomas (Executive Director): According to the financial reports that you have prepared, we have been fighting to reach breakeven over the past three years. We have been able to just get past breakeven recently, but I am worried--it seems like only a slight variation in our operations could throw us into an operating loss. I've been actively involved in managing the Center, and I don't understand how we avoid showing a loss!
Susan (Accountant): Unfortunately, I have no oversight with respect to monitoring performance since my job is to input the financial and units of service numbers into the accounting system as they occur. I am currently working more than 40 hours a week so I am not sure what else I could do. Maybe we can hire someone like a consultant to help us?
Thomas: In reality, securing some outside assistance seems to be a good option to avoid future losses. Since my training is in psychology, I don't have the accounting background to take the task on myself. We need someone who specializes in financial management for nonprofit human service organizations.
The Executive Director and Accountant of Bridgestone were discussing the importance of being able to understand better the operating and financial performance of the company. The company engages in providing prevention, intervention and treatment for people with substance problems. The company experienced a loss during the prior year but a profit of $7,000 is expected in the current year.
Here goes a conversation between the executive director and Accountant:
Thomas (Executive Director): According to the financial reports that you have prepared, we have been fighting to reach breakeven over the past three years. We have been able to just get past breakeven recently, but I am worried--it seems like only a slight variation in our operations could throw us into an operating loss. I've been actively involved in managing the Center, and I don't understand how we avoid showing a loss!
Susan (Accountant): Unfortunately, I have no oversight with respect to monitoring performance since my job is to input the financial and units of service numbers into the accounting system as they occur. I am currently working more than 40 hours a week so I am not sure what else I could do. Maybe we can hire someone like a consultant to help us?
Thomas: In reality, securing some outside assistance seems to be a good option to avoid future losses. Since my training is in psychology, I don't have the accounting background to take the task on myself. We need someone who specializes in financial management for nonprofit human service organizations.