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ormat Painter Clipboard Font Alignment Number P18 1 NAME: 2 PROBLEM SET 7 3 4 5 Assigned Problem 3 6 Fargo Memorial Hospital has annual net patient service revenues of $14.4 million. The hospital's 7 patient accounts manager estimates that 10 percent of third party payers pay on Day 30, 60 percent 8 pay on Day 60, and 30 percent pay on Day 90. Assume 360 days per year throughout this problem. 9 a. What is Fargo's average collection period? 10 b. What is the firm's current receivables balance? 11 c. What would be the firm's new receivables balance if a newly proposed electronic claims system 12 resulted in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days? 13 d. Suppose the firm's annual cost of carrying receivables was 10 percent. If the electronic elaims 14 system costs $30,000 a year to lease and operate, should it be adopted? (Assume that the entire 15 receivables balance has to be financed.) 16 17 ANSWER 18 Chapter 15-Revenue Cycle and Current Accounts Management 20 Day 21 Percent who pay 22 Average collection period 23 24 b. 25 Gross sales per year 26 Days per year 27 Gross sales per day 28 Average collection period 29 Receivables balance 30 30 60 90 Assigned Problem 1 Assigned Problem 2 Assigned Problem 3