Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 53C
1.
To determine
Calculate the break-even point if the additional 20 beds are not rented.
2.
To determine
Show the net increase or decrease in earnings due to the rental of additional 20 beds.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Delaware Medical Center operates a general hospital. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Delaware charges each separate entity for common services, such as patients’ meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Delaware Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x1:
Patient Days (variable)
Bed Capacity (fixed)
Dietary
$
540,000
—
Janitorial
—
$
71,000
Laundry
240,000
—
Laboratory
400,000
—
Pharmacy
320,000
—
Repairs and maintenance
—
33,000
General and administrative
—
1,320,000
Rent
—
1,570,000
Billings and collections
230,000
—
Total
$
1,730,000
$
2,994,000…
Delaware Medical Center operates a general hospital. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Dela-ware charges each separate entity for common services, such as patients’ meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Delaware Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x1"
Patient Days Bed Capacity
Dietary ....................................................................... $600,000 —
Janitorial .......................................................................— $70,000
Laundry…
During its current fiscal year, Evanston General Hospital, a not-for-profit health care organization, had the following revenue-related transactions (amounts summarized for the year).
Services provided to inpatients and outpatients amounted to $9,600,000, of which $450,000 was for charity care; $928,000 was paid by uninsured patients; and $8,222,000 was billed to Medicare, Medicaid, and insurance companies.
Donated pharmaceuticals and medical supplies valued at $265,000 were received and utilized as general expenses.
Medicare, Medicaid, and third-party payors (insurance companies) approved and paid $5,365,000 of the $8,222,000 billed by the hospital during the year (see transaction 1).
An unconditional contributionPage 687 of $5,000,000 was received in cash from a donor to construct a new facility for care of Alzheimer’s patients. The full amount is expendable for that purpose. No activity occurred on this project during the current year.
A total of $965,000 was received from…
Chapter 7 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 7 - Prob. 1RQCh. 7 - What is the meaning of the term unit contribution...Ch. 7 - What information is conveyed by a...Ch. 7 - What does the term safety margin mean?Ch. 7 - Prob. 5RQCh. 7 - Delmarva Oyster Company has been able to decrease...Ch. 7 - In a strategy meeting, a manufacturing companys...Ch. 7 - What will happen to a companys break-even point if...Ch. 7 - Prob. 9RQCh. 7 - How can a profit-volume graph be used to predict a...
Ch. 7 - List the most important assumptions of...Ch. 7 - Why do many operating managers prefer a...Ch. 7 - Prob. 13RQCh. 7 - East Company manufactures VCRs using a completely...Ch. 7 - When sales volume increases, which company will...Ch. 7 - What does the term sales mix mean? How is a...Ch. 7 - A car rental agency rents subcompact, compact, and...Ch. 7 - How can a hotels management use cost-volume-profit...Ch. 7 - How could cost-volume-profit analysis be used in...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Explain briefly how activity-based costing (ABC)...Ch. 7 - Fill in the missing data for each of the following...Ch. 7 - Prob. 24ECh. 7 - Rosario Company, which is located in Buenos Aires,...Ch. 7 - The Houston Armadillos, a minor-league baseball...Ch. 7 - Prob. 27ECh. 7 - Europa Publications, Inc. specializes in reference...Ch. 7 - Tims Bicycle Shop sells 21-speed bicycles. For...Ch. 7 - A contribution income statement for the Nantucket...Ch. 7 - Refer to the income statement given in the...Ch. 7 - Hydro Systems Engineering Associates, Inc....Ch. 7 - Disk City, Inc. is a retailer for digital video...Ch. 7 - CollegePak Company produced and sold 60,000...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Consolidated Industries is studying the addition...Ch. 7 - Serendipity Sound, Inc. manufactures and sells...Ch. 7 - Prob. 41PCh. 7 - The European Division of Worldwide Reference...Ch. 7 - Prob. 43PCh. 7 - Celestial Products, Inc. has decided to introduce...Ch. 7 - Prob. 45PCh. 7 - Jupiter Game Company manufactures pocket...Ch. 7 - Prob. 47PCh. 7 - Condensed monthly income data for Thurber Book...Ch. 7 - Cincinnati Tool Company (CTC) manufactures a line...Ch. 7 - Ohio Limestone Company produces thin limestone...Ch. 7 - Prob. 51PCh. 7 - Colorado Telecom, Inc. manufactures...Ch. 7 - Prob. 53CCh. 7 - Prob. 54CCh. 7 - Niagra Falls Sporting Goods Company, a wholesale...
Knowledge Booster
Similar questions
- Prepare journal entries to record the following transactions of a nonprofit hospital, with expense transactionscategorized by function:1. The hospital billed its uninsured patients for $300,000. Based on historical experience, it expects tocollect 45 percent of that amount over time.2. Nurses and doctors employed by the hospital were paid their salaries, $120,000.3. The chief administrative officer was paid her salary of $12,000.4. The hospital paid its utility bill, $6,000.5. Depreciation on the equipment was $40,800.6. Several adults donated their time (worth $6,000) selling merchandise in the hospital gift shop.7. The hospital billed Medicare $120,000 for services provided at its established rates. The prospectivebilling arrangement gives Medicare a 40 percent discount from these rates.8. A contribution without donor restrictions of $4,800 was received. If no adjustment is necessary, select 'No debit (or credit) entry needed' in the account fields and enter 0 in the amount fields.arrow_forwardAssume that services during the year included these three patients: Mrs. Marple, a Medicare patient whose stay at Reston Hospital (one of HCA’s owned hospitals) was for 7 days and who received services which HCA assigned in retail charges (otherwise termed gross revenue) of $25,000. The Medicare DRG payment for her case is expected tobe $10,000; Mr. Chan, a patient with little income or assets and one whom the hospital classifies as a charity patient, stayed in the hospital 4 days and received services with gross charges amounting to $18,000; Mr. Friday stayed in the hospital for 3 days and received services with gross charges amounting to $28,000. Although Mr. Friday had no insurance, he did have a significant source of income and had a sizable amount of assets. Attempts by the hospital to locate Mr. Friday to settle his bill have proven fruitless, and currently he has moved and has left no forwarding address. Assume that at the end of the period the status of the bills for the…arrow_forwardSt. Joseph's Hospital began operations In December 2019 and had patlent service revenues totaling $1,230,000 (based on customary rates) for the month. Of this, $138,.000 is billed to patlents, representing their Insurance deductibles and copayments. The balance is billed to third-party payors, Including Insurance companles and govemment health care agencies. St. Joseph's estimates that 20 percent of these third-party payor charges wll be deducted by contractual adjustment. The hospital's fiscal year ends on December 31. Required: 1. Prepare the Journal entries for December 2019. Assume 15 percent of the amounts billed to patlents will be reduced through Implicit price adjustments. 2 Prepare the Journal entries for 2020 assuming the following: a. $18.000 is collected from the patients during the year and $1,300 of price adjustments are granted to individuals. b. Actual contractual adjustments total $306,000. The remalning recelvable from third-party payors Is collected. (If no entry Is…arrow_forward
- St. Joseph's Hospital began operations In December 2019 and had patient service revenues totaling $980,000 (based on customary rates) for the month. Of this, $122,000 is billed to patients, representing their Insurance deductibles and copayments. The balance is billed to third-party payors, including Insurance companies and government health care agencies. St. Joseph's estimates that 20 percent of these third-party payor charges will be deducted by contractual adjustment. The hospital's fiscal year ends on December 31. Required: 1. Prepare the journal entries for December 2019. Assume 15 percent of the amounts billed to patients will be reduced through implicit price adjustments. 2. Prepare the journal entries for 2020 assuming the following: a. $102,000 is collected from the patients during the year and $9,800 of price adjustments are granted to Individuals. b. Actual contractual adjustments total $186,000. The remaining receivable from third-party payors is collected. (If no entry is…arrow_forwardAccounting for patient service revenue Ruby Ruth Hospital had the following transactions during the year ended December 31:1. The hospital provided services to patients insured by third-party payer A amounting to $9.0 millionat its established billing rates. The hospital’s prospective billing arrangement with this third partystipulates payment to the hospital of 70 percent of its established rates for services performed.All billings were paid during the year.2. The hospital provided services to patients insured by third-party payer B amounting to $5.4 millionat its established billing rates. Its retrospective billing arrangement with this third party stipulatesthat the hospital should receive payment at an interim rate of 90 percent of its established rates,subject to retrospective adjustment based on agreed-upon allowable costs. By year-end, B had paidall the billings. Before issuing its financial statements, the hospital estimated that the probableamount it will need to refund to B…arrow_forwardSt. Joseph's Hospital began operations in December 2023 with patient service revenues totaling $1,110,000 (based on customary rates) for the month. Of this, $200,000 is billed to patients, representing their insurance deductibles and copayments. The balance is billed to third-party payors, including insurance companies and government health care agencies. St. Joseph's estimates that 20 percent of these third-party payor charges will be deducted by contractual adjustment. The hospital's fiscal year ends on December 31. Required: 1. Prepare the journal entries for December 2023. Assume 15 percent of the amounts billed to patients will be reduced through implicit price adjustments. 2. Prepare the journal entries for 2024 assuming the following: a. $112,000 is collected from the patients during the year, and $10,700 of price adjustments are granted to individuals. b. Actual contractual adjustments total $190,000. The remaining receivable from third-party payors is collected. Note: For all…arrow_forward
- 3. Please complete the journal entries for this St. Joseph’s Hospital began operations in December 2023 with patient service revenues totaling $980,000 (based on customary rates) for the month. Of this, $207,000 is billed to patients, representing their insurance deductibles and copayments. The balance is billed to third-party payors, including insurance companies and government health care agencies. St. Joseph’s estimates that 20 percent of these third-party payor charges will be deducted by contractual adjustment. The hospital’s fiscal year ends on December 31. Required: Prepare the journal entries for December 2023. Assume 15 percent of the amounts billed to patients will be reduced through implicit price adjustments. Prepare the journal entries for 2024 assuming the following: $102,000 is collected from the patients during the year, and $9,800 of price adjustments are granted to individuals. Actual contractual adjustments total $157,000. The remaining receivable from…arrow_forwardSt. Joseph's Hospital began operations in December 2023 with patient service revenues totaling $1,330,000 (based on customary rates) for the month. Of this, $220,000 is billed to patients, representing their Insurance deductibles and copayments. The balance is billed to third-party payors, including Insurance companies and government health care agencies. St. Joseph's estimates that 20 percent of these third-party payor charges will be deducted by contractual adjustment. The hospital's fiscal year ends on December 31. Required: 1. Prepare the journal entries for December 2023. Assume 15 percent of the amounts billed to patients will be reduced through Implicit price adjustments. 2. Prepare the journal entries for 2024 assuming the following: a. $123,000 is collected from the patients during the year, and $11,800 of price adjustments are granted to Individuals. b. Actual contractual adjustments total $229,000. The remaining receivable from third-party payors is collected. Note: For all…arrow_forwardUnder Lennon Hospital's rate structure, it earned patient service revenue of $9 million for the year ended December 31, 2017. However, Lennon did not expect to collect this entire amount because it deemed $1.4 million to be charity care and estimated contractual adjustments to be $800,000. During 2017, Lennon purchased medical supplies from Harrison Medical Supply Company at a cost of $4,00O. Harrison notified Lennon that it was donating the supplies to the hospital. Lennon is a private not-for-profit entity: a. How much should Lennon record as patient service revenue? (Enter your answer in millions rounded to 1 decimal place.) b. How much should Lennon record as net patient service revenue? (Enter your answer in millions rounded to 1 decimal place.) c. How should Lennon record the donation of the supplies? (Enter your answer in dollars not in millions.) a. Patient service revenue million b Net patient service revenue million C. Donation of the suppliesarrow_forward
- Under Lennon Hospital’s rate structure, it earned patient service revenue of $9 million for the year ended December 31, 2017. However, Lennon did not expect to collect this entire amount because it deemed $1.4 million to be charity care and estimated contractual adjustments to be $800,000. During 2017, Lennon purchased medical supplies from Harrison Medical Supply Company at a cost of $4,000. Harrison notified Lennon that it was donating the supplies to the hospital. Lennon is a private not-for-profit entity. How much should Lennon record as patient service revenue and how much as net patient service revenue? How should Lennon record the donation of the supplies?arrow_forwardGreat Heart Clinic is a medical service institute that provides various services for its patients. The doctors working for the institute are required to fill out a note in the medical system for each patient treated. The system then generates a unique bill for each patient according to the pricing for the specific service or treatment received. Included in each patient’s bill is the applied overhead cost based on direct labor hours. The clinic created the following overhead budget for this year, but the actual overhead was $296,047. Budget Direct labor hours 10,000 Overhead costs: Indirect material $3,500 Indirect labor $45,000 Utilities $6,000 Insurance $78,000 Property taxes $30,000 Total $162,500 During this year, the doctors actually charged a total of 12,190 hours as shown below. Doctors Hours Charged Doctor A 2,000 Doctor B 1,850 Doctor C 1,960 Doctor D 2,100 Doctor E 2,500 Doctor F 1,780 Total 12,190 The overhead variance is deemed…arrow_forwardA company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning