1. Your firm has $45.0 million invested in accounts receivable, which is 90 days of net revenues. If this value could be reduced to 50 days, what annual increase in income would your firm realize if the increase in cash could be invested at 7.5 percent?

Use the following information to answer questions 2, 3, and 4:

You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

Number of Budgeted Procedures	10,000
Budgeted Cost	$400,000
Desired Profit	$ 80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer	Volume %	Discount %
Blue Cross	20	4
Unity	15	10
Kaiser	10	10
Self-Pay	5	40
	50%

Your supervisor recommends the following method to set the rate per procedure in order to generate the required $80,000 in profit:

Weighted Discount = (0.4 0.04) + (0.30 0.10) + (0.20 0.10) + (0.10 0.40)

= 0.106

Price = ($400,000 10,000) + [($80,000 + 4,000 ($40.00 $38.00)) 5,000]

1 0.106

=($40.00 + $17.60)/.894 = $64.43

2. If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?

3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?