Module Code: HSPV5W-15-5
Module Title: Accounting Information for Business
Assessment Title: Component B: Marie Travis Home Care Service – Cost Volume Profit.
Assessment Length: 1500 words
Brief: – Case Study Business Background
Marie Travis is a qualified community nurse and has been running a small home care service whilst bringing up her family of two boys. Her care service has operated in a very informal fashion where she has, on average, three private clients at any given time who each receive half an hour of care in the morning and evening, overall, this takes Marie approximately 4 hours a day as the remainder of time is spent travelling between clients. Marie travels thirty miles per day using her Nissan Qashqai for transport; this incurs a depreciation value of £3000 pa which can be written off as an operational expense. Marie charges £32 per hour and works 7 days a week for 48 weeks of the year, when she is on holiday her clients buyin other support. Her client’s independently source any products they need.
A broad summary of Marie’s annual overheads are as follows:
- Petrol – To be calculated by you
- Car Insurance and Maintenance – £1200
- Business Insurance £1000 Continued Professional Development £1000
- Uniform £250
- Consumables £600
- Pension 7% of earnings
- National Insurance – To be calculated by you
- Income Tax – To be calculated by you
The informality of Marie’s business has allowed her to fund her own car, maintain her CPD and complete her own tax self-assessment each year as a sole trader. This arrangement has worked well for Marie and her family but now the boys have reached their teenage years and her client waiting list grows by the week, she believes that her business could expand in order to cater for a greater number of clients, whilst generate a greater impact within the community and create a small profit for her efforts.
Task 1
Marie is keen to calculate her cost volume and profit for her current business and has asked you to work out her break-even point in hours, margin of safety and profit for her current scenario.
Task 2
Marie can now commit to an extra hour in the morning which would extend her day by an hour and a half and involve extra travel of 10 miles per day, she has two new clients who wish to receive half an hour of care each. She has asked you to recalculate the figures that you used in task one to incorporate this change.
Task 3
Many of Marie’s ‘would be’ client’s state that her service would be a great addition to the community if she were to grow her business and employ other members of staff. In the interim Marie contacted The United Kingdom Home Care Association (TUKHCA) to try and get some information about the additional costs when employing staff; they kindly returned a costing model, see https://www.ukhca.co.uk/CostingModel/.
Marie is currently considering expanding her business to include an additional three members of staff and has made a start at considering how they might be incorporated into her business and their associated costs. She has provided some additional information below:
- Number of new care staff – 3
- Chargeable hours per person day – 7
- Operating 7 days per week with each carer working 5 days per week
- Rate of pay – to be decided by you
- Mileage per day, per member of care staff -30 miles, mileage rate £0.25
- Staff cover and Service Management to be covered by Marie.
- Staff leave and sickness will be taken as unpaid in the first year.
- Staff Rate of pay – To be decided by you Marie will now take the profits from the business, and this will be known as her salary/income.
- Start-up costs have been estimated at £10,000, this will cover Marie’s increase in working capital, recruitment and initial training costs of the three members of staff. These costs will be written off over two years.
Please consider any other costs that may be relevant to the provision of three members of staff. Using the information above and the model provided by TUKHCA, Marie would like you to research the relevant costs/deductions associated with her Home Care Service Proposal; Marie is keen to see your application of the TUKHCA model and a summary of her business costs, break-even point in service hours and her estimated annual profit. It is suggested that you include your list of assumptions within an appendix.
Task 4
Write a report advising Marie of your recommendations for developing her business using a blend of internal and external factors and your key figures from tasks 1-3.