Assignment

Problems – Solve the following. Show your work! 1. (32 Points) Co-Video videos people’s surgeries, and has the following cost structure:

Charge per video session $ 180 Variable cost per video session $ 45 Fixed costs $15,000

They expect to perform 1,000 two hour session each year (one employee, 8hrs/day, 5 days/week, 50 weeks/year).

A. Construct PETA’s profit and loss statement.

B. How many sessions must PETA’s perform to breakeven?

Sessions.

C. The owner would like to retire and live of just his investment in this

business. To earn a profit of $175,500 (his current salary), how many

sessions must they provide this year?

Sessions.

D. If the employee worked only half time, thus only performing 500

sessions per year, The owner thinks he will earn half of the amount

found in Part A. What would actually be the profit/loss (fixed costs

remain the same)?

2. (42 Points) St. Payne Med Center is using the step-down method to allocate costs. They have two support departments (Record Keeping and Cleaning), and two patient service departments (Eye Care and Dental Care). Some of the Record Keeping costs are allocated to Cleaning before the support department costs are allocated to patient service departments. Record Keeping costs are allocated based on the number of employees, while Cleaning costs are allocated by the number or rooms. The following data has been collected:

Support Departments Patient Revenue Departments Record Keeping Cleaning Eye Care Dental Care Department Costs $ 54,000 $78,000 $120,000 $220,000 Number of Employees 4 6 9 12 Number of Rooms 2 2 7 3 a. What amount of the Record Keeping is allocated to Cleaning? $ b. What amount of the Record Keeping is allocated to Eye Care? $

c. What amount of the Record Keeping is allocated to Dental Care? $ d. What amount of the Cleaning is then allocated to Eye Care? $ e. What amount of the Cleaning is then allocated to Dental Care? $

f. After Allocation, What are Eye Care’s total costs? $

g. After Allocation, What are Dental Care’s total costs? $

3. (34 Points) Dental Diversity provides three basic service appointments; Cleaning, Check-up, and Full service. Total annual costs average $750,000. An RVU analysis indicates the following:

Annual Average Appointments RVUs/appointment Cleaning 3,000 4 Check-ups 3,500 6 Full Service 1,700 10

A. Using RVU methodology, what is the cost for each type of appointment?

B. If the goal is a 37.5% profit margin, what should be the price for each type of appointment?

4. (34 Points) Here are the 2020 revenues for Nu-Kim Radiology for four different budgets:

Flexible Flexible Static Enrollment & Utilization Enrollment Actual Budget Budget Budget Results $300,000 $280,000 $312,000 $324,000

Calculate the following: a. Revenue Variance = b. Volume Variance = c. Price Variance =

d. Enrollment Variance = e. Utilization Variance = f. Interpret each variance:

1) Revenue Variance –

2) Volume Variance –

3) Price –

4) Enrollment Variance –

5) Utilization Variance –