Assignment Directions
In this part of the course, you will prepare a pro forma income statement for a new or revised product or service you recommend for East Chestnut
Regional Health System.
Review Case Study: East Chestnut Regional Health System.
Pro Forma Income Statement for East Chestnut Regional Health:
Please complete the following prior to preparing the pro forma income statement and budget. You will need the following information in order to
prepare it.
Part I: Market Size Calculation:
Determine the size of the market for the ECRHS product or service you are recommending. Assume East Chestnut Regional Health is located in
the market in which you live or work.
Visit the University Library Consumer Demographics page.
From this page, visit the United States Census Bureau sites linked under the Demographic Data heading. A rough estimate of need for health care
products or services can be made based on the population demographics, using age, gender, and in some cases, race. On these sites, you can
gain information on the total U.S. market for health care, as well as the number of U.S. consumers who fit your target market segmentation.
Determine the local market for the product or service you recommend for East Chestnut Regional Health.
Next, multiply the percentage of people likely to purchase your recommended ECRHS product or service by the estimate of market share you
believe ECRHS can achieve for the product or service. For example, if there are 6,000 women who might be interested in ECRHS obstetrical
services, and ECRHS has a potential 40 percent market share, this results in 2,400 patients.
Prepare a 150- to 300-word summary of your market determination process.
MHACB/506 Competency 3 Rubric
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Part II: Breakeven Analysis:
A breakeven analysis determines the number of products or amount of service that must be sold to consumers for the organization to break even
or cover the costs of production or provision of the product or service.
You will prepare a breakeven analysis for the case study client, East Chestnut Regional Health.
Use the Breakeven Analysis Worksheet to prepare your analysis.
Prepare a 150- to 300-word summary of your breakeven analysis that includes the following:
• The fixed and variable costs of product production or service provision
• The price and number of units sold at that price
• The number of units of product or service sold to cover the fixed and variable costs at the price level
Part III: Pro Forma Income Statement:
A pro forma is an income statement that predicts income for the new or revised product or service you are recommending to East Chestnut
Regional Health System (ECRHS) after one year. It shows the sales ECRHS expects to achieve during that period of time, along with the costs
associated with that level of sales. The organization must cover the costs of products or services it delivers (cost of goods sold) and the expenses
we estimate to achieve those sales (salaries for sales reps, advertising and promotion, office expenses, etc.). This will leave us with a projected
profit.
A good pro forma income statement proves out a strategy by showing the expected revenue minus the expected costs and the resulting profit.
Conversely, it shows, for example, that you can’t have $100,000 in forecast sales and $3 million in projected advertising, since that would result in
a loss.
Use the Pro Forma Income Statement Worksheet to create your pro forma income statement.
Create a pro forma income statement based on the above. Include the following for 1 year:
• Projected sales volume in units and revenue
• Projected cost of goods/services
• Projected marketing expenses
• Projected net income
Prepare a 500-word summary statement of your pro forma income statement for East Chestnut Regional Health System for the new or revised
existing product or service you have recommended. Include the following:
• Summary of market size calculation (150 words)
• Summary of breakeven analysis (150 words)
• Summary of projected profit (200 words)