Q1. James Florence is in the 35percent personal tax bracket. He is considering investing in HCA(taxable) bonds that carry a 12% interest rate.

A. What is his after-tax yield (interest rate) on bonds?

B. Suppose Queens Medical Center has issued tax-exempt bonds that have an interest rate of 6%. With all else same, should James Florence buy the HCA or the Queens Medical Center bonds??

C. with all else the same, what interest on tax-exempt Queens Medical Center bonds would make Florence indifferent these bonds and the HCS bonds??

Q2. The Shelter for Abused Women and Children has fixed costs of $550,000 and variable costs of $125 per client. What are the shelters total expenses if it serves 4,000 clients.

Q3. The Housekeeping Department of Marshfield Clinic has direct costs of $1,200,000. The clinic's four patient service departments utilize the following amounts of space: Department A 5,000 square feet Department B10,000 Department C15,000 Department D20,000 Assuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department C?

Q4. Assume that Jacobi Medical Center has fixed costs of $15,000,000 and a variable cost (per inpatient day) rate of $150. What is the total cost forecast for a volume of 45,000 patient days?

Q5. Assume that the department of radiology has the following cost structure

Fixed costs: $650,000 Variable cost per procedure: $17

Furthermore, assume that the department of radiology expects to perform 6,500 procedures in this coming year.

What is the department of radiologys underlying cost structure?

What are the department of radiologys expected total costs?

What are the department of radiology estimated total cost at 5,000 procedures?

What is the average cost per procedure at 5,000 and 6,500 procedures??

Q6. The Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, OH, had $150,000 in direct cost during 2012. These costs must be allocated to Rugers three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient service revenue and hours of housekeeping services used. The patient service departments generated $7,000,000 in total revenues during 2012. To support these clinical activities, the department used 6,000 hours of housekeeping services.

What is the value of the cost pool??

What is the allocation rate if (1) patient services revenue is used as the cost driver and (2) hours of housekeeping services are used as the cost driver?? (10 points)

Q7. Refer to Question 6. Assume that the 3 patient services departments are Adult Services, pediatric Services, and Other Services. The patient services revenue and hour of housekeeping services for each department are as follows:

Department	Revenue	Housekeeping
Adults Services	$4,000,000	2,000
Pediatrics Services	2,000,000	3,000
Other Services	1,000,000	1,000
Total	$7,000,000	6,000

A. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver??

B. What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver??

C. What is the difference in allocation to each department between the two drivers??

D. Which of the two drivers is better ? Why?? (20 points)

Q8. Consider the data in the table below for three independent health services organizations:

	Revenues	Total Variable Costs	Fixed Cost	Total Costs	Profit
HCO A	$2,000	$1,400		$2,000
HCO B		$1,000		$1,600	$2,400
HCO C	$4,000		$600		$400

Fill in the missing data indicated by question marks.