Variable Cost and Patient Services Revenue

1. Middleton Clinic had total assets of 500,000 and an equity balance of 350,000 at the end of 2010. One year late, at the end of 2011, the clinic had 576,000$ in assets and 380,000 $ in equity. What was the clinic’s dollar growth in assets during 2011, and how was this growth financed?

Clinic’s dollar growth from 2010 to 2011 = 576,000-500,000= 76,000 $

It was financed in increasing of Equity by 30,000 $ and the rest in the assets which is 76,000-30,000= 46,000 $

Chapter 5
1. Consider the CVP graphs below for two providers operating in a fee-for-service environment: a. Assuming the graphs are drawn to the same scale, which provider has 1- the greater fixed costs? 2- The greater variable cost rate? 3-The greater per unit revenue? 1- B

2- B
3- A

b. Which provider ha the greater contribution margin? B
c. Which provider needs the higher volume to break even? A d. How would the graphs below change if the providers were operating in a discounted fee-for-service environment? In a capitated environment Revenue and Costs

($)
Total Costs
Loss

Profit Total Revenue

Fixed costs

0 Volume (Number of Visits)

Chapter 6

1. The housekeeping services department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had 100,000 $ in direct costs during 2011. These costs must be allocated to Ruger’s three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated 5,000,000 $ in total revenues during 2011, and to support these clinical activities, they used 5,000 hours of housekeeping services. a. What is the value of the cost pool?

It is 100,000 $

b. What is the allocation rate if:
* Patient services revenue is used as the cost driver?
Allocation rate= cost pool/ cost driver
= 100,000/ patient services revenue = 100,000/ 5,000,000
= 0.02 per dollar
* Hours of housekeeping services is used as the cost driver? Allocation rate= cost pool/ cost driver
= 100,000/ hours of housekeeping services = 100,000/ 5,000
= 20 per hour