Yes 2

Before you begin, save this document to your computer. You will need to submit your answers in the area indicated below.

DIRECTIONS:

1. Read page 106 of your Revenue Management Manual textbook and all additional reading materials under “Presentation Materials”.

2. Answer the following all questions in this 3 part assignment.

3. Please remember to SAVE this document to your computer or “My Documents” on your computer.

4. Submit the saved file to your “Assignment Drop Box”.

Tips for answering questions:

· Read the question more than twice, if necessary, to make sure you understand what you are asked to do.

· Find the key words in each question and construct your answer to address those key words or phrases of the question.

· Your answer should be organized and to the point.

· Keep your sentences short and simple. Pay attention to the answer length requirements (if stated).

· If necessary, go the extra mile and give examples to illustrate your point.

Before you continue:

· Did you save this document to your computer?

· No: Please save this document to your computer now.

· Yes: Great! Let’s get to work!

PART 1:

Dr. Jones is interested in expanding his practice by adding a piece of radiology equipment. The basic cost of the equipment would be $79,000 for the first year. The monthly loan cost for this equipment is $1,564.29 for five years. Additionally Dr. Jones will have to factor in the cost to hire a radiology tech with a predicted $39,600 annual salary (this includes all taxes and fringe benefits). The office already has a radiology room so there is no fixed costs associated with this purchase.

You help Dr. Jones determine that the office will do 1100 studies per year with an average reimbursement of $51.63. The variable cost per study is $3.24.

Using the standard pro forma sheet, is this a good purchase? Why?

25 points

Directions to complete Question 1:

· Use short responses, in complete sentences with proper grammar and spelling

· Your answer should be no less than 4 to 8 sentences.

PART 2: Reviewing the Budget

Dr. Jones’ office has purchased the above equipment. It is now Year #2 and there is a $7,000 annual maintenance fee that needs to be added to the costs of the equipment. The variable cost is now $3.37 per study but Dr. Jones’ office is planning on doing 1675 studies because there has been an addition of two new managed contracts and there has been a reimbursement increase to $53.16

A. What is the profit or loss this year?

B. Looking at the two years together, was this a good purchase?

25 points

Directions to complete Question 2:

· Use short responses, in complete sentences with proper grammar and spelling

· Your answer should be no less than 4 to 8 sentences.

Answer (A): Type your answer here

Answer (B): Type your answer here

PART 3: Preparing a Budget for 2012

Using the information in Part #1 and #2, calculate the standard pro forma sheet years #3 through year #6.

The changes to be considered in your calculations are the following:

25 points

Answer: Type your answer here

You will earn additional points if you:

· correctly submit the worksheet to the assignment dropbox.

· use proper sentence structure, grammar and spelling.

5 points

TOTAL POINTS

80 points

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