Discussion: Calculating Fixed Costs

Want create site? With you can do it easy.

Discussion: Calculating Fixed Costs

Discussion: Calculating Fixed Costs

Don't use plagiarized sources. Get Your Custom Essay on
Discussion: Calculating Fixed Costs
From \$10/Page

Consider the CVP graphs below for two providers operating in a fee-for-service environment: see attached file
a. Assuming the graphs are drawn to the same scale, which provider has the greater fixed costs? The greater variable cost rate? The greater per unit revenue?

b.Which provider has the greater contribution margin?

c.Which provider needs the higher volume to break even?

d. How would the graphs change if the providers were operating in a discounted fee-for-service environment? In a capitalized environment?

5.3

Assume that a radiologist group practice has the following cost structure:

Fixed Costs:                \$500,000
Variable Cost per procedure:         \$25
Charge (revenue) per procedure:    \$100

Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.

a.    Construct the group’s base case projected P&L statement.

b.    What is the group’s contribution margin? What is its breakeven point?

c.    What volume is required to provide a pretax profit of \$100,000? A pretax profit of \$200,000?

d.    Sketch out a CVP analysis graph depicting the base case situation. Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Redo questions a, b, c, and d under these conditions.

5.4

General 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 discounted proposal?

5.5

You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:

Revenues:            \$400,000
Wages & Benefits:        \$220,000
Rent:                \$5,000
Depreciation:            \$30,000
Utilities:                \$2,500
Medical Supplies:        \$50,000

Assume that all costs are fixed, except supply costs, which are variable. Furthermore, assume that the clinic must pay taxes at a 20 percent rate.

a.    Construct the clinic’s projected P&L statement.

b.    What number of visits is required to break even?

c.    What number of visits is required to provide you with an after-tax profit of \$100,000?

6.1

The housekeeping services department of Ruger Clinic, a multi-specialty practice in Toledo, Ohio had \$100,000 in direct costs during 2011. These costs must be allocated to Ruger’s three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated \$5 million in total revenues during 2011, and to support these clinical activities, they used 5,000 hours of housekeeping services.

a.    What is the value of the cost pool?

b.    What is the allocation rate if:

i.    Patient services revenue is used as the cost driver?

ii.    House of housekeeping services is used as the cost driver?

6.2

Refer to Problem 6.1. Assume that the three patient services departments are adult services, pediatric services, and other services. The patients services revenue and house of housekeeping services for departments are:

Department    Revenue    Housekeeping Hours
Pediatric Services    1,500,000    3000
Other Services    500,000    500
Total    5,000,000    5000

a.    What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?

b.    What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver?

c.    What is the difference in the allocation to each department between the two drivers?

d.    Which of the two drivers is better? Why?

6.3

St. Benedict’s Hospital has three support departments and four patients services departments. The direct costs to each of the support departments are:

Facilities:        \$5,000,000
Financial Services:    \$3,000,000

Selected data for the three support and four patient services department are:

Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services patient services revenue, while the cost driver for facilities is space utilization.

a.    What are the appropriate allocation rates?

b.    Use a allocation table similar to Exhibit 6.7 (below) to allocate the hospital’s overhead costs to the patient services departments.

6.4

Assume that the hospital uses salary dollars as the cost driver for general administration, housekeeping labor hours as the cost driver for facilities, and patient services revenue as the cost driver for financial services. (The majority of the costs of the facilities department stem from the provision of housekeeping services.)

a.    What are the appropriate allocation rates?

b.    Use an allocation table similar to the one used for Problem 6.3 to allocate the hospital’s overhead costs to the patient services departments.

c.    Compare the dollar allocations with those obtained in Problem 6.3. Explain the differences.

d.    Which of the two cost driver schemes is better? Explain.

Did you find apk for android? You can find new and apps.

Calculate the price
Pages (550 words)
\$0.00
*Price with a welcome 20% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with My Course Writer
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 10k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Psychology
Thank you so much for all of your hard work, appreciate every bit of it!
Customer 452483, September 6th, 2021
Healthcare Writing & Communications
Perfect! Thank you so much for all of your help!
Customer 452483, October 31st, 2021
Psychology
Thank you for all of your help and hard work, truly appreciate you guys always being there with my hectic schedule. Thank you again!
Customer 452483, September 20th, 2021
Nursing
Excellent. Thank you.
Customer 452487, August 26th, 2021
Nursing
Good job! Thank you
Customer 452487, October 17th, 2021
Mathematics
Thank you, great work!
Customer 452483, July 19th, 2021
Biology (and other Life Sciences)
Power Point Presentation was great, appreciate all of your hard work. Thank you!
Customer 452483, August 9th, 2021
Nursing
Customer 452487, August 22nd, 2021
English 101
Thank you guys for always being there and helping me always get a 100% on my assignments!
Customer 452483, August 16th, 2021
Education
Customer 452555, February 16th, 2022
English 101
Perfect! Very informative! Appreciate all of your hard work! Thank you very much.
Customer 452483, September 22nd, 2021
Nursing
Good job. Thank you
Customer 452487, September 16th, 2021
1159
Customer reviews in total
96%
Current satisfaction rate
2 pages
Average paper length
47%
Customers referred by a friend