2. Your health club wants to develop a product cost for the following activities using labor expense and supply expense to assign direct costs and visit minutes as a cost driver to assign costs and create RVUs. Also, calculate the charge based on a 10% profit margin. This problem is worth 50 points. Projected total costs for the health club are $800,000 ($500,000 direct cost and $300,000 indirect costs). Assign costs to each activity using the following information.

Activity Projected Labor Supply Visit Volume Expense Expense Minutes

Personal Trainer 3,750 100 15 60 Dietician 2,950 75 35 30 Exercise Classes 5,900 65 25 60

Calculate the charge based on a 10% profit margin.

Template:

Students are going to calculate the total direct cost, calculate the total indirect cost and then the total cost. The template below will help you do your calculations.

Total Direct RVU

Step 1: Calculate Labor + Supply

Activity Labor + Supply = Total Direct Expense

Personal Trainer Dietician Exercise Classes

Step 2:

Calculate Direct RVU ( Use the average method. Add up the line items and divide by the number of items.) _______________ answer. Take Total Direct Expense and divide by Average method answer = RVU per procedure

Activity

Personal Trainer _____________ divided by_____________ = RVU per procedure Dietician ___________________ divided by ____________ = RVU per procedure Exercise Classes_____________ divided by ____________ = RVU per procedure

Step 3:

Calculate the Total RVU

Activity RVU X Projected Volume = Total Direct RVU

Personal Trainer___________ ______________ ______________ Dietician_________________ ______________ ______________ Exercise Classes___________ ______________ ______________

Total ______________

Step 4:

Calculate the Direct total cost ( homework problem) by dividing it by Total Direct RVU = Total Direct Cost per RVU

Direct total cost / Total Direct RVU = Total Direct Cost per RVU

Step 5:

Calculate the Direct Cost per Procedure.

Total Direct Cost per RVU X RVU = Direct Cost Procedure

Personal Trainer Dietician Exercise Classes

Total Indirect RVU

Step 1:

Calculating RVU Indirect RVU

Personal Trainer visit minutes ___________ divide by average method figure = _________

Dietician minutes_____________________ divide by average method figure =__________ Exercise Classes minutes_______________ divide by average method figure = _________

Step 2: Calculate Total Indirect RVU

Total Indirect RVU X Volume = Total Indirect

Personal Trainer _____________ _________ ___________ Dietician ___________________ _________ ___________ Exercise Classes______________ _________ ___________

Total ____________

Step 3: Calculate Projected Total Cost by Total Indirect = Cost per RVU

Indirect = Projected Total cost = _______________ Indirect Cost per RVU Total Indirect RVU

Step 4: Calculate Indirect Cost per RVU x RVU = Indirect Cost Procedure

Personal Trainer___________ ______________ __________ Dietician_________________ ______________ __________ Exercise Classes___________ _______________ __________

Total Cost

Step 1

Calculate Direct Cost + Indirect Cost = Total Cost x 10% Markup = Charge

Personal Trainer _________________ __________ __________ __________ _______ Dietician _________________ ___________ __________ __________ _______ Exercise Classes __________________ ___________ __________ __________ _______