4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $30,000 cost of goods sold that Worley incurred serving each hospital.)
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4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $30,000 cost of goods sold that Worley incurred serving each hospital.)
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- Bluegrass Community Hospital (BCH) has the following payer groups: Number of Admissions Average Revenue per Admission Variable Cost per Admission Commercial 1,000 $5,000 $3,000 BCBS 4,000 $4,500 $4,000 Medicare 8,000 $7,000 $2,500 Given: BCH annual fixed costs are $38M What is BCH’s net income? If half of the 100,000 covered lives in the Commercial group moved to a capitated rate and utilization and cost data remained the same, what PMPM rate should be charged to maintain the Commercial group net income share? What would BCH net income be if the Commercial capitated group admissions decreased by 10%? What would BCH net income be if the Commercial capitated group admissions decreased by 10% and variable costs for the Commercial capitated group decreased to $2,200?Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies. For years, Worley believed that the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $30,000 to buy from manufacturers): 4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the…Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies. For years, Worley believed that the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 500,000 5,000 deliveries Manual order processing (Number of manual orders) 248,000…
- Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies. For years, Worley believed that the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 500,000 5,000 deliveries Manual order processing (Number of manual orders) 248,000…Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies. For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 249,000 3,000 deliveries Manual order processing (Number of manual orders) 576,000…Below are the projected revenues and expenses for a new clinical nurse specialist program being established by a hospital. Nurses would provide education while the patient is in the hospital and home visits after patient discharge on a fee-for-service basis. Should the hospital undertake the program if its required rate of return is 12%? Year 1 Year 2 Year 3 Year 4 Total Revenue costs 100,000 150,000 200,000 250,000 700,000 150,000 150,000 150,000 150,000 600,000 (50,000) 0 50,000 100,000 100,000
- The hospital where you are employed is continuing with their analysis with the goal of opening a walk-in clinic. After conducting additional research, the financial projections for the first year of operations are as follows: Revenues (from 10,000 visits): $400,000 Wages and benefits: $220,000 Rent: $5,000 Depreciation: $30,000 Utilities: $2,500 Medical supplies: $50,000 Administrative supplies: $10,000 Assume that all costs are fixed except supply costs, which are variable. Assume that the clinic will be required to pay taxes at a 30% tax rate. Respond to the following questions. Be sure to show your work for all calculations. Prepare the clinic’s projected Profit and Loss (P&L) Statement. (8 points) What number of visits is required to break even? (3 points) What number of visits is required to provide you with an after-tax profit of $100,000? (4 points)a small clinic treats only 10 patients. it expects operating cost per patient will be $1,800 or total $18,000. It desires an operating margin of $3600. If the clinic trates one patient as a charity case, how much must the clinic charge the 9 patients in order to reach its financial requirements?What is the value of the cost pool and allocation rate if patient service is used as cost driver and hours of housekeeping used as a cost driver? $100,000 in direct costs, $5 million in patient service revenues, & 5,000 hrs of housekeeping
- Charity Hospital, a not-for-profit, has a maximum capacity of 15,000 discharges per year. Variable patient service costs are $495 per discharge. Variable general and administrative costs are $5 per discharge. Fixed hospital overhead costs are $4,000,000 per year. The current reimbursement rate is $1,000 per discharge. a. What is Charity’s breakeven volume in number of discharges? b. Now assume Charity’s total discharges for 2014 totaled 10,000. In late 2014, a specialty cardiac hospital opened near Charity, so that discharges in 2015 will reach only 8,500. Management is planning cut fixed costs so that the total for 2015 will be $1,000,000 less than in 2014. Management is also considering reducing variable staffing costs in order to earn a target profit that will be the same dollar amount as the profit earned in 2014. Charity has already had 4,000 discharges in 2015 at a reimbursement rate of $1,000 per discharge with variable costs unchanged. What contribution margin per unit is…At the beginning of the new year, Mumford Regional's chief competitor is planning to open a brand-new Women's and Children's Hospital nearby. As a result, Mumford expects all its supply needs to decrease by 20%. Currently it's contracted vendor is Vendor C, using the information in Exhibit 10-14, determine whether if Mumford should change its contracted vendor to Vendor A or Vendor B. Enter total expense for using Vendor A. Enter total expense for using Vendor B. Enter total expense for using Vendor C. Which vendor should Mumford select? Enter Vendor A, Vendor B or Vendor C as your answer. Exhibit 10-14 Alternative Vendor Options for Mumford Regional Volume of Vendor A Vendor B Vendor C Supplies Unit Total Unit Total Unit Total Supply Needed Price Cost Price Cost Price Cost Item 1 88,000 $ 2.35 $ 206,800 $ 2.42 $ 212,960 $ 2.28 $ 200,640…General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services: Fixed costs $1,093,754 Variable cost per inpatient day $19 Charge (revenue) per inpatient day $105 The hospital expects to have a patient load of 1,599 inpatient days next year. Assume that 18 percent of the hospital's inpatient days come from a managed care plan that wants a 27 percent discount from charges. What is the change in profit if the hospital accepts the proposal?