HSMA 4055 Quiz 3

Assume that Methodist Hospital has annual fixed costs of $50,000,000 and a variable cost rate of $200 per inpatient day. What is the average cost per patient day at an annual volume of 50,000 patient days?

$1,200

Consider the following data: Fixed costs = $10 million Variable cost per inpatient day = $400 What revenue per inpatient day is required to obtain a profit of $1 million at a volume of 10,000 patient days?

$1,500

Assume that Lexington Hospital has fixed costs of $10,000,000 and a variable cost (per inpatient day) rate of $200. What is the total cost forecast for a volume of 50,000 patient days?

$20,000,000

Assume that Goodhealth Clinic has fixed costs of $1,000,000 and a total cost forecast of $1,500,000 at a volume of 20,000 patient visits. What is the clinic's variable cost rate?

$25

Assume the following cost and revenue data for General Hospital: Fixed costs = $15 million Variable cost per inpatient day = $250 Revenue per inpatient day = $1,000 What is the expected profit at a volume of 25,000 inpatient days?

$3.75 million

The Housekeeping Department of Micanopy Hospital has direct costs of $500,000. The hospital's four patient service departments use the following amounts of space: Department A = 1,000 square feet Department B = 2,000 Department C = 3,000 Department D = 4,000 Assuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department A?

$50,000

Assume that Randall Clinic has fixed costs of $500,000 and a variable cost (per visit) rate of $20. What is the total cost forecast for a volume of 5,000 patient visits?

$600,000

Consider the following data: Fixed costs = $10 million Variable cost per inpatient day = $400 Revenue per inpatient day = $1,200 What is the contribution margin?

$800

Assume the following cost and revenue data for General Hospital: Fixed costs = $15 million Variable cost per inpatient day = $250 What revenue per inpatient day is required to obtain a profit of $1 million at a volume of 25,000 patient days?

$890

Super Clinics offers one service that has the following annual cost and volume estimates: Variable cost per visit = $10 Annual direct fixed costs = $50,000 Allocation of overhead costs = $20,000 Expected volume = 1,000 visits What price per visit must be set if the clinic wants to make an annual profit of $10,000 on the full cost of the service?

$90

Consider the following data: Fixed costs = $10 million Variable cost per inpatient day = $400 Revenue per inpatient day = $1,200 What is the breakeven volume (in patient days)?

12,500

Assume the following cost and revenue data for General Hospital: Fixed costs = $15 million Variable cost per inpatient day = $250 Revenue per inpatient day = $1,000 What is the breakeven volume (in patient days)?

20,000

Which of the following statements about managerial accounting is incorrect?

Managerial accounting information is prepared in accordance with rules established by outsiders (generally accepted accounting principles)

Which of the below statements about cost allocation is most correct?

The reciprocal method is conceptually the best but typically he most expensive to implement

Which of following statements regarding the relationship between reimbursement method and risk is/are most correct?

Under capitation, risk is reduced by maximizing the percentage of fixed costs under fee for service, risk is reduced by maximizing the percentage of variable costs (answers a and d are correct)

When a provider has market dominance and hence can set its own (within reason), it is called a price taker

false

true or false: in economics, the situation in which average cost (per unit of output) declines as volume increases is known as economies of scope

false

true or false: in general, the best way to allocate costs in a large organization is to assign all overhead expenses to a single cost pool with one cost driver

false

Which of the following pricing strategies is most likely to lead to long term financial sustainability?

full cost

Which of the following statements about activity-based costing (ABC) is most correct?

it is most useful for assigning costs to individual services

Which of the following statements about relevant range is most correct?

it is the range of output (volume) for which the organization's cost structure holds

Which of the following statements about cost allocation is most correct?

none of the above statements are correct

Which of the following pricing strategies is most likely to ensure profitability on a contract undertake by a price-taker provider?

target costing

Which of the following statements best describes the contribution margin?

the contribution margin is the dollar amount of each unit of output that is available first to cover fixed costs and then to contribute to profit

Effective cost drivers should have which of the following characteristics?

they should be perceived as being fair they should create an incentive for cost reduction (both a and b)

True or false: the goal (purpose) of cost allocation is to assign all overhead costs to the activities (departments) that cause the costs to be incurred

true

Under capitation, the contribution margin is negative when volume is measured by units of output (per visit, per procedure, per patient day, and so on)

true

Under full-cost pricing, prices are set to cover all costs, including economic costs (profits).

true

Utilization management is more important for capitated patients than fee-for-service patients.

true

true or false: the relationship between costs and the volume of services provided is called underlying cost structure

true