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Variable Cost and Patient Services Revenue

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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

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

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