Hsa 525 problems | Accounting homework help

Week 4 Homework

Chapter 7: 7-1, 7-2, 7-3, & 7-4

Don't use plagiarized sources. Get Your Custom Essay on
Hsa 525 problems | Accounting homework help
Just from $5/Page
Order Essay

Chapter 8: 8-1, 8-2, 8-3, & 8-4

 

7.1

Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates:

Variable cost per visit     $       5.00

Annual direct fixed costs          $500,000

Annual overhead allocation     $   50,000
Expected annual utilization                 10,000

  1. What per-visit price must be set for the service to break even? To earn an annual profit of $100,000?
  2. Repeat Part a, but assume that the variable cost per visit is $10.
  3. Return to the data given in the problem. Again repeat Part a, but
    assume that direct fixed costs are $1,000,000.
  4. Repeat Part a assuming both $10 in variable cost and $1,000,000 in direct fixed costs.

 

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                       Variable Cost                        Annual Direct                                   Annual # Visits

 per Service               Fixed Costs

Basic exam                       $5                                 $50,000                                     3,000

Advanced examination    $7                                           $30,000                                  1,500

Therapy session               $10                                     $40,000                                    500

  1. What is the fee schedule for these services, assuming that the goal is
    to cover only variable and direct fixed costs?
  2. Assume that the audiology department is allocated $100,000 in
    total overhead by the clinic, and the department director has al­
    located $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 overhead costs to each service is made on the basis of number of visits.)
  3. Assume that these services must make a combined profit of $25,000 . Now what is the fee schedule? (To answer this question, assume that the profit requirement is allocated in the same way as overhead costs.) lied Laboratories is combining some of its most common

 

7.3

Allied Laboratories is combining some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

                                                                                Test A                  Test B                 Test C

Disposable syringe      $3.00  $3.00  $3.00

Blood vial         0.50    0.50    0.50

Forms  0.15    0.15    0.15

Reagents       0.80    0.60    1.20

Sterile bandage        0.10    0.10    0.10

Breakage/losses      0.05    0.05    0.05

When the tests are combined, only one syringe, form, and sterile ban­dage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required).

  1. As a starting point, what is the price of the combined test assuming
    marginal cost pricing?
  2. Assume that Allied wants a contribution margin of $10 per test.
    What price must be set to achieve this goal?
  3. Allied estimates that 2,000 of the combined tests will be conduct­ed during the first year. The annual allocation of direct fixed and
    overhead costs total $40,000. What price must be set to cover full
    costs? What price must be set to produce a profit of $20,000 on the combined test?

 

 

 

7.4

Assume that Valley Forge Hospital has only the following three payer groups:

 

                             Number of           Average Revenue      Variable Cost

Payer                   Admissions        per Admission            per Admission

PennCare                 1,000                      $5,000                       $3,000

Medicare                  4,000                          4,500                        4,000

Commercial             8,000                           7,000                         2,500

The hospital’s fixed costs are $38 million,

  1. What is the hospital’s net income?
  2. Assume that half of the 100.000 covered lives in the commercial payer group 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?
  3. What overall net income would be produced if the admission rate
    of the capitated group were reduced from the commercial level by
    10 percent?
  4. Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to $2,200?

 

 

8.1

Consider the following 2011 data for Newark General Hospital (in millions of dollars):

Static              Flexible         Actual

Budget                        Budget          Results

Revenues                             $4.7                $4.8                $4.5

Costs                                      4.1                   4.1                   4.2

Profits                                     0.6                   0.7                   0.3

a.    Calculate and interpret the profit variance.

b.    Calculate and interpret the revenue variance.

c.    Calculate and interpret the cost variance.

d.    Calculate and interpret the volume and price variances on the revenue side.

e.    Calculate and interpret the volume and management variances on the cost side.

f.     How are the variances calculated above related?

 

 

 

 

 

 

8.2

Here are the 2011 revenues for the Wendover Group Practice Association for four different budgets (in thousands of dollars):

Flexible                                     Flexible

Static                         Enrollment/Utilization)                  (Enrollment)             Actual

Budget                                  Budget                                  Budget                      Results

$425                                       $200                                       $180                           $300

a.    What does the budget data tell you about the nature of Wendover’s patients: Are they capitated or fee-for-service? (Hint: See the note to
Exhibit 8.7.)

b.    Calculate and interpret the following variances:

  Revenue variance

  Volume variance

  Price variance

  Enrollment variance

 

8.3 Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars):

      Static               Flexible         Actual

Number of surgeries                1,200                 1,300                  1,300

Patient revenue                      $2,400               $2,600                  $2,535

Salary expense                          1,200                 1,300                 1,365

Non-salary expense                     600                    650                 585

Profit                                          $600                  $650                     $585

The center assumes that all revenues and costs are variable and hence tied directly to patient volume.

a.    Explain how each amount in the flexible budget was calculated. (Hint
Examine the static budget to determine the relationship of each bud­
get line to volume.)

 

b.    Determine the variances for each line of the profit and loss statement,
both in dollar terms and in percentage terms. (Hint: Each line has a total variance, a volume variance, and a price variance [for revenues
and management variance [for expenses].)

 

c.    What do the Part b results tell Brandon’s managers about the surgery center’s operations for the quarter?

 

 

8.4

Refer to Carroll Clinic’s 2011 operating budget contained in Exhibit 8.3, Instead of the actual results reported in Exhibit 8.4, assume the results reported below:

Carroll Clinic: New 2011 Results

/.      Volume:

A.         FFS                                                                              34,000  visits

B.         Capitated lives                                                              30,000  members
Number of member-months                                           360,000

Actual utilization per

member-month                                                              0.12

Number of visits                                                                        43,200 visits

C.         Total actual visits                                                          77,200 visits

 

II.   Revenues:

 

A.FFS                                                      $28   per visit

X 34,000  actual visits $   952,000

 

B.            Capitated lives                                     $          2.75  PMPM

X 360,000   actual member-months $  990,000

 

C.Total actual revenues                            $1,942,000

 

III. Costs:

A. Variable Costs:

            Labor                                        $1,242,000 (46,000 hours at $27/hour)

            Supplies                                   126,000 (90,000 units at $1.40/unit)

                        Total variable costs       $          17.72 ($1,368,000 / 77,200)

 

B. Fixed Costs

            Overhead, plant,

            and equipment              $525,000

 

C. Total actual costs                  $1,893,000

 

IV. Profit & Loss Statement:

            Revenues:

                        FFS                              $952,000

                        Capitated                      $990,000

                                    Total                 $1,942,000

 

            Costs:

                        Variable:

                                    FFS                  $602,487

                                    Capitated          765,513

                                                Total     $1,368,000

 

            Contribution Margin                   $574,000

            Fixed Costs                              525,000

            Actual profit                              $49,000

 

  1. Construct Carroll’s flexible budget for 2011.

 

  1. What are the profit variance, revenue variance, and cost variance?

 

  1. Consider the revenue variance. What is the component volume variance? The price variance?

 

  1. Break down the cost variance into volume and management components.

 

 

  1. Break down the management variance into labor, supplies, and fixed cost variances.

 

  1. Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.

 

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We are committed to making our customer experience enjoyable and that we are keen on creating conditions where our customers feel secured and respected in their interactions with us.
With our qualified expert team who are available 24/7, we ensure that all our customer needs and concerns are met..

Money Payback-back guarantee

Our refund policy allows you to get your money back when you are eligible for a refund. In such a case, we guarantee that you will be paid back to your credit card. Another alternative we offer you is saving this money with us as a credit. Instead of processing the money back, keeping it with us would be an easier way to pay for next the orders you place

Read more

Zero-plagiarism guarantee

All orders you place on our website are written from scratch. Our expert team ensures that they exercise professionalism, the laid down guidelines and ethical considerations which only allows crediting or acknowledging any information borrowed from scholarly sources by citing. In cases where plagiarism is confirmed, then the costumier to a full refund or a free paper revision depending on the customer’s request..

Read more

Free-revision policy

Quality is all our company is about and we make sure we hire the most qualified writers with outstanding academic qualifications in every field. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

We understand that students are not allowed to seek help on their projects, papers and assignments from online writing services. We therefore strive to uphold the confidentiality that every student is entitled to. We will not share your personal information elsewhere. You are further guaranteed the full rights of originality and ownership for your paper once its finished.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency