Midterm health care finance

Assignment Exercise 6–1: Allocating Indirect Costs

Study Table 6–1, Example of Radiology Departments Direct and Indirect Cost Totals, and Table 6–2, Example of Indirect Costs Allocated to Radiology Departments, and review the chapter text describing how the indirect cost is allocated. This assignment will change the allocation bases: A) Volumes, B) Direct Costs, and C) Number of Films.

Required

Compute the costs allocated to cost centers #557, 558, 559, 560, and 561 using the new allocation bases shown below. Use a worksheet replicating the set up in Table 6–2. Total the new results.

1.  The new allocation bases are: 
                              

2. A) Volumes	3. 120,000	4. 130,000	5. 70,000	6. 110,000	7.  70,000	8.  500,000
9. B) Direct costs	10. $1,100,000	11. $700,000	12. $1,300,000	13. $1,600,000	14. $1,300,000	15. $6,000,000
16. C) No. of films	17. 400,000	18. 20,000	19. 55,000	20. 25,000	21. 20,000	22. 520,000

23.   

Using a worksheet replicating the set up in Table 6–1, enter the new direct cost and the new totals for indirect costs resulting from your work. Total the new results.

Assignment Practice Exercise 7–I: Analyzing Mixed Costs

The Metropolis Health System has a system-wide training course for nurse aides. The course requires a packet of materials that MHS calls the training pack. Due to turnover and because the course is system-wide, there is a monthly demand for new packs. In addition the local community college also obtains the training packs used in their credit courses from MHS.

The Education Coordinator needs to know how much of the cost is fixed and how much of the cost is variable for these training packs. She decides to use the high-low method of computation.

Required

Using the monthly utilization information presented below, find the fixed and variable portion of costs through the high-low method.

                                                                   

Month	Number of Training Packs	Cost
January	1,000	$6,200
February	200	1,820
March	250	2,350
April	400	3,440
May	700	4,900
June	300	2,730
July	150	1,470
August	100	1,010
September	1,100	7,150
October	300	2,850
November	250	2,300
December	100	1,010

Assignment Exercise 7–1: Analyzing Mixed Costs

The Education Coordinator decides that the Community College packs may be unduly influencing the high-low computation. She decides to re-run the results omitting the Community College volume.

Required

24. Using the monthly utilization information presented below, and omitting the Community College training packs, find the fixed and variable portion of costs through the high-low method. Note that the college only acquires packs in three months of the year: January, May, and September. These dates coincide with the start dates of their semesters and summer school.

25. The reason the Education Coordinator needs to know how much of the cost is fixed is because she is supposed to collect the appropriate variable cost from the Community College for their packs. For her purposes, which computation do you believe is better? Why?

                                                                                             

Month	Total Number of Training Packs	TotalCost	Community College Number Packs	Community College Cost
January	1,000	$6,200	200	$1,240
February	200	1,820
March	250	2,350
April	400	3,440
May	700	4,900	300	2,100
June	300	2,730
July	150	1,470
August	100	1,010
September	1,100	7,150	300	1,950
October	300	2,850
November	250	2,300
December	100	1,010

 

Assignment Exercise 7–2: Calculating the Contribution Margin

The Mental Health program for the Community Center has just completed its fiscal year end. The Program Director determines that his program has revenue for the year of $1,210,000. He believes his variable expense amounts to $205,000 and he knows his fixed expense amounts to $1,100,000.

Required

1. Compute the contribution margin for the Community Center Mental Health program.

2. What does the result tell you about the program?

Assignment Exercise 7–3: Calculating the PV Ratio and the CVP Ratio

Use the same assumptions for the Greenside Clinic as in Practice Exercise 7–II. One more assumption will be added: the Clinic had 35,000 visits.

Required

1. In addition to the contribution margin figures already computed, now compute the PV Ratio (also known as CM Ratio).

2. Add another column to your worksheet and compute the clinic’s per-visit revenue and costs.

Create a Cost-Volume-Profit chart. Refer to the chapter text along with Figure 7–6.