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Concept explainers
1.
Calculate the daily rates of G M Clinic using unit-based costing approach assuming the cost of daily care are assigned using only patient days as the activity driver.
2.
Calculate the activity rates using the relevant activity drivers for all activities of G M Clinic.
3.
Calculate the charge per patient day for each patient type by using the relevant activity rates of G M Clinic.
4.
Provide information on the additional information required to cost out a newly defined product called stay and treatment where the treatment is bypass surgery.
5.
Provide information on the value activity based cost provides in service industries.
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Chapter 4 Solutions
Bundle: Cornerstones of Cost Management, Loose-Leaf Version, 4th + CengageNOWv2, 1 term Printed Access Card
- Regression; choosing among models. Apollo Hospital specializes in outpatient surgeries for relatively minor procedures. Apollo is a nonprofit institution and places great emphasis on controlling costs in order to provide services to the community in an efficient manner. Apollo’s CFO, Julie Chen, has been concerned of late about the hospital’s consumption of medical supplies. To better understand the behavior of this cost, Julie consults with Rhett Bratt, the person responsible for Apollo’s cost system. After some discussion, Julie and Rhett conclude that there are two potential cost drivers for the hospital’s medical supplies costs. The first driver is the total number of procedures performed. The second is the number of patient-hours generated by Apollo. Julie and Rhett view the latter as a potentially better cost driver because the hospital does perform a variety of procedures, some more complex than others. Rhett provides the following data relating to the past year to Julie.…arrow_forwardVIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from subscribers. The per member, per month rate (PMPM) is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $376 per month, which is the same amount irrespective of the subscriber’s age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, National Physicians, entered the North Carolina market early in the current year with a monthly premium of $333. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in the current year. The latest data on the number of enrollees and the associated costs follow: Age Enrollment in…arrow_forwardRecent research into the cost of various medical procedures has shown the impact of certain complications encountered in surgery on the total cost of a patient’s stay in the hospital. The researchers used regression analysis and found the following results: Total cost for patient = Constant, plus a × Length of stay (measured in days), plus b × Presence of one or more complications (= 1 if true, 0 if false), plus c × Use of a laparoscope (= 1 if true, 0 if false) where a, b, c are coefficients of the regression model. The laparoscope is an instrument somewhat like a miniature telescope with a fiber-optic system that brings light into the abdomen. It is about as big around as a fountain pen and twice as long. The research, based on 63 patients, showed the following regression results: R-squared: 56% Constant term: $3,158 Coefficients and t-values for independent variables: Length of Stay Complications Laparoscope Coefficient $ 887 $ 1,912 $ 928 t-value 7.51 5.30…arrow_forward
- John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in thehospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals andhave resulted in many complaints. Also, because of strict regulations on amounts reimbursed for labtests, payments received from insurance companies and governmental units have not been high enoughto cover lab costs.Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The followinginformation is available:a. Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,800 bloodtests and 2,400 smears were performed in the lab.b. Small glass plates are used in both types of tests. During the past month, the hospital purchased12,000 plates at a cost of $28,200. This cost is net of a 6% quantity discount. 1,500 of these plateswere unused at the end of the month; no plates were on hand at the beginning of the month.c.…arrow_forwardParktown Medical Center, Inc.. is a small health care provider owned by a publicly heldcorporation. It employs 7 salaried physicians, I0 nurses, 3 support stafl, and 3 clericalworkers. The clerical workers perform such tasks as reception, correspondence, cashreceipIs,billing, and appointment scheduling. All are adequately bonded. Most patients pay for services rendered by cash or check on the day of their visit.Sometimes.however, the physician who is to performservices apprcredit based on an interview. When credit is approved, the physician files a memo vone of the clerks to set up the receivable using data the physician generates.The servicing physician prepares a charge sup that 1s given to one or the clerKs IorDicing and preparation of the patient S bill. At the end of the dav.one of the clerks usesthe bills to preparea revenue summarv and. in cases of credit sales. to update thecounts receivable subsidiary ledger.The frontoffice clerks receive cash and checksdirectly from patients…arrow_forwardDr. Mirwais Amiri, chairman of the Amiri Medical Complex (AMC), is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at AMC than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Dr. Amiri has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,800 blood tests and 2,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 1,150 hours of labor time…arrow_forward
- Ann Reynolds has recently been hired as practice manager for Dr. LaRue. In reviewing the financial records of the practice, she notices that a substantial amount of money is owed by patients with outstanding balances. Further review finds that the practice has no written financial policies outlining the responsibility of patients in paying for their costs of medical care. Outline a set of basic financial policies to address patient responsibility for payment of charges.arrow_forwardWhich of the following activity bases would be the most appropriate for food costs of a hospital? a.quantity of prescriptions filled b.how many MRI's are taken c.number of nurses scheduled to work d.number of patients who stay in the hospitalarrow_forwardPauline Cooper is a registered dietitian and the foodservice director at Memorial Hospital. Increasingly, the hospital’s marketing efforts have emphasized its skill in treating diabetic patients. As a result, the number of diabetic meals served by Pauline’s staff has been increasing. As a professional member of the hospital’s management team, Pauline has been asked to report on how the hospital’s diabetic treatment marketing efforts have affected her area.1. How important is it that Pauline have historical records of the type (i.e., vegetarian, low-sodium, gluten-free, and the like) of meals served by her staff and not merely the number of meals served? Why?2. Assume that Pauline’s per-meal cost has been increasing because diabetic meals are more expensive to produce than regular meals. Could Pauline use sales histories to estimate the financial impact of serving additional diabetic meals in the future? How?3. What are other reasons that managers in a foodservice operation might keep…arrow_forward
- John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,100 blood tests and 3,600 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 18,000 plates at a cost of $58,140. 2,600 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 2,600 hours…arrow_forwardJohn Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor…arrow_forwardJohn Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 500 blood tests and 2,500 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,500 plates at a cost of $45,000. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 1,500 hours of…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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