Homework Problem 3.1 Your hospital is considering offering a new outpatient service. Using the following data, answer the questions below. RELEVANT DATA: Variable cost per visit Annual direct fixed costs Annual overhead allocation Expected utilization (visits) $20 $700,000 $80,000 15,000 a. What is the breakeven price? b. What price is needed to earn a profit of $100,000?

Homework Problem 3.1 Your hospital is considering offering a new outpatient service. Using the following data, answer the questions below. RELEVANT DATA: Variable cost per visit Annual direct fixed costs Annual overhead allocation Expected utilization (visits) $20 $700,000 $80,000 15,000 a. What is the breakeven price? b. What price is needed to earn a profit of $100,000?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter10: Standard Costing And Variance Analysis

Section: Chapter Questions

Problem 1MTC

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How to solve 4.5 parts a through d?
1. Bronx Lebanon Diagnostic Care has the following cost structure: Fixed Costs $800,000 Variable cost per procedure $35 Charge (revenue) per procedure $110 Assume that the Bronx Lebanon Diagnostic Care expects to perform 7,500 procedures in the coming year. a. Construct the groups base case projected P & L statement. Insert your response here. b. What is the group’s contribution margin? Insert your response here. c. What is the breakeven point? (in number of procedures) Insert your response here. d. Let say they contract with one HMO for all 7,500 procedures and the plan proposes a 20 percent discount from charges. Answer questions a,b,c under these conditions.
7.2. The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Basic examination Advanced examination Therapy session Variable Cost Annual Direct Annual Number of Visits Fixed Costs 3,000 1,500 500 per Service $5 7 10 $50,000 30,000 40,000 a. What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs? b. Assume that the audiology department is allocated $100,000 in total overhead by the clinic, and the department director has allocated $50,000 of this amount to the three services listed above. What is the fee schedule assuming that these overhead costs must be covered? (To answer this question, assume that the allocation of the $50,000 in overhead costs to each service is made on the basis of number of visits.) c. Assume that these services must make a combined profit of $25,000. Now what is the fee schedule? (To…
5.4General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services: Fixed costs $10,000,000 Variable cost per inpatient day 200 Charge (revenue) per inpatient day 1,000 The hospital expects to have a patient load of 15,000 inpatient days next year. a.Construct the hospital’s base case projected P&L statement. b.What is the hospital’s breakeven point? c.What volume is required to provide a profit of $1,000,000? A profit of $500,000? d.Now assume that 20 percent of the hospital’s inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?
The following table contains selected data concerning the operation of the MHA Medical Center. Use the break-even formula and fill the missing information.
Now assume that the additional patients will add $200,000 in total to theCenter’s fixed costs. Now what is the expected profit on 20 new patients?On 40 new patients? (No new fixed costs are required to support the secondgroup of 20 patients.)
Assume that Valley Forge Hospital has only the following three payer groups: Payer Number of Average Revenue Cost Admissions Admission PennCare $3,000 Medicare $4,000 Commercial $2,500 1,000 4,000 8,000 per Admission $5,000 $4,500 $7,000 Variable per The hospital's fixed costs are $38 million. a. Using the profit/loss format from our textbook and PowerPoints in this module, determine the hospital's net income, therefore showing your work to demonstrate how you got to the net income answer. b. Assume that half of the 100,000 covered lives in the commercial payer group (above) will be moved into a capitated plan. All utilization and cost data remain the same. What PMPM rate will the hospital have to charge to retain its Part A net income (what you calculated above)?
Problem 1c: Consider the following information for Rosebud Lane Hospital. The number of admissions for the year are expected to equal 1000, but could vary from 750 to 1250. Rosebud's fee-for-service is $2,000 under a prospective payment system. Under a capitation reimbursement system, Rosebud must cover 1000 patients at a capitation payment of $2,000. Rosebud's annual fixed costs are $500,000 and it variable cost per admission is $1,500. 1c. Calculate Rosebud's net profit under the Fee For Service Reimbursement method if admissions are 1250. (Answer to the nearest dollar. Do not include the dollar sign in your answer.) 1d. Calculate Rosebud's net profit under Capitation if admissions are 1250. (Answer to the nearest dollar. Do not include the dollar sign in your answer.)
A tree provider to plant nurseries is trying to use customer lifetime value to determine the value of its customers. Two customers are shown below. Use customer lifetime value to determine the importance of each customer. Use an 8 percent discount rate. Avg. Annual Sales Avg. Profit Margin 10% $12,500 $26,000 20% Do not round intermediate calculations. Round your answers to the nearest dollar. NPV (Customer A): $ NPV (Customer B): $ What do you recommend? Customer B ✓ Customer A: Customer B: is more important. Expected Lifetime 5 years 9 years
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