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COSTING AND PROFIT ANALYSIS Homework 2.1, Chapter 5 Using the data below, answering the following questions: Fixed costs Variable cost/day Charge (rev)/day Inpatient days $12,500,000 $350 $1,200 16,000 a. Construct the hospital's base case projected P&L statement Total Revenues Total Variable cost Total Cont. Margin Fixed Cost Profit 19,200,000 5,600,000 13,600,000 12,500,000 1,100,000 b. What is the hospital's breakeven point (volume / patient days needed to breakeven)? 19,200,000-5,600,000-12,500,000=1,100,000 c. What is the economic breakeven (volume required ) to provide a profit of $1,000,000? (850 X VOL) -12,500,000=100,000 850 X VOL = 13,699,450 VOL=16117 d. What is the total contribution margin if volume decreases by 20%? 850 X VOL 16117-3223=12894 850 X 12894= 10,959,900 e. Based on the scenario in d., if fixed costs remain the same, what is the hospital's profit or loss? 10,959,900-12,500,000= loss of 1,540,100 COSTING AND PROFIT ANALYSIS Homework 2.2, Chapter 5 You are considering starting a walk-in clinic. Your financial projections for the first year of operations are below. Revenue and variable costs are based on the projected number of visits. Medical and administrative supplies are variable costs; all other costs are fixed costs. Projected Visits Revenues Wages & benefits Rent Depreciation Utilities Medical supplies Administrative supplies 15,000 $750,000 300,000 15,000 40,000 7,500 65,000 12,000 a. Construct the clinic's projected P&L statement Total revenue Total variable cost Total Cont. margin Fixed cost Profit 750,000 84,500 665,500 355,000 310,500 b. What is the total contribution margin? 750,000-84,500=665,500 c. What is the contribution margin rate (rounded to the nearest dollar)? 665,500/750,000= .89 d. What is the clinic's breakeven point? 750,000-84,500-355,000=310,500 e. What is the economic breakeven for a profit of $100,000? 666,500, It will take .15 visits to generate 100,000 profit DEPARTMENTAL COSTING AND COST ALLOCATION Homework 2.3, Chapter 6 St. Benedict Hospital has three primary revenue producing departments (Inpatient, Outpatient, Clinic) with the following revenue and cost projections. In order to better determine the departments’ overall true cost and profit margin, management wants to allocate service department costs as overhead allocations to these departments. PROJECTED REVENUES AND COSTS PER DEPARTMENT Revenues Inpatient Services Outpatient Services Clinic Services Total revenues Direct Costs Inpatient Services Outpatient Services Clinic Services Total costs Service Department Costs Financial Services Facilities Housekeeping Administration Total overhead costs Total Costs Projected Profit Allocation Data Inpatient Services Outpatient Services Clinic Services Total General Administration Department Financial Services Facilities Housekeeping Administration $18,500,000 32,000,000 12,250,000 $62,750,000 $8,250,000 16,500,000 8,500,000 $33,250,000 $4,000,000 7,500,000 5,600,000 8,500,000 $25,600,000 $58,850,000 $3,900,000 Square Feet 210,000 180,000 65,000 455,000 Cost Driver Patient revenue Square feet Housekeeping hrs Salary dollars Housekeeping Hours 80,000 58,000 26,000 164,000 Salary Dollars $6,500,000 $12,500,000 $5,500,000 $24,500,000 Management considered various cost drivers and made the determiniation to use the following as the most relevant for each service department: Based upon this information, complete the following, filling in each highlighted cell. Be sure to use formulas to show your work Allocation Data Square Feet Housekeeping Hours Salary Dollars Indirect Cost Allocations Financial Services Facilities Housekeeping General Administration Total Indirect Costs Revenue Direct Costs Profit using Direct Costs Profit margin % Indirect Costs Total Costs Profit using Total Costs Profit margin % Inpatient Outpatient Clinic Total 210,000 180,000 65,000 455,000 80,000 58,000 26,000 164,000 $6,500,000 $12,500,000 $12,500,000 $31,500,000 $18,500,000 $32,000,000 $12,250,000 $62,750,000 $8,250,000 16,500,000 8,500,000 $33,250,000

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