Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dr. Jones is deciding on whether to open a Surgery Center. He estimates that the annual Fixed Overhead costs for the center will be $100,000.

Dr. Jones is deciding on whether to open a Surgery Center. He estimates that the annual Fixed Overhead costs for the center will be $100,000. He also estimates that he will have $75,000 is fixed staffing costs. Dr. Jones accountant has told him that his variable costs will be $250 per surgical case in staffing costs, plus an additional $75 per case in medical supplies. In studying the fee schedules of Medicare and Blue Cross, Dr. Jones feels that he will earn approximately $750 per case based on both the payer mix and types of procedures he will be performing. What is Dr. Jones incremental profit per case? Based on the information given, what volume of cases does Dr. Jones need to have in order to break-even? Dr. Smith is deciding on whether to open a new clinic. He estimates that the annual Fixed Overhead costs for the center will be $200,000. He also estimates that he will have $100,000 is fixed staffing costs. Dr. Smiths office manager has told him that his variable costs will be $15 per patient in staffing costs, plus an additional $5 per case in medical supplies. In studying the fee schedules of Medicare and Blue Cross, Dr. Smith feels that he will earn approximately $100 per case based on both the payer mix and types of patient visits he will be seeing. What is Dr. Smiths incremental profit per case? Based on the information given, what volume of cases does Dr. Smith need to have in order to break-even? Dr. Smiths office manager has told him he will need to clear an additional $150,000 of cash flow (above break-even) in order to pay the debt service on the cost of the equipment and yield the required return on the investment. What volume of cases does Dr. Smith need to do to meet this target? What is the average cost per case at this volume? Dr. Jones accountant has told him he will need to clear an additional $200,000 of cash flow (above break-even) in order to pay the debt service on the cost of the equipment and yield the required return on the investment. What volume of cases does Dr. Jones need to do to meet this target? What is the average cost per case at this volume?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forensic Accounting And Fraud Examination

Authors: Mary Jo Kranacher, Richard Riley

2nd Edition

1119494338, 9781119494331

More Books

Students also viewed these Accounting questions

Question

6. Explain what causes unsafe acts.

Answered: 1 week ago