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Tar Heel Home Healthcare Inc. wants to develop a product cost for the following activities using labor expense and supply expense to assign direct costs
Tar Heel Home Healthcare Inc. 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 indirect costs. Projected total costs are $ $ direct and indirect Assign costs to each activity using the following information. Also, calculate the charge based on profit margin.
Activities Projected Labor Supply Visit
Volume Expense$ Expense $ Minutes
Nursing Care
Nutritionist
Physical Therapy
Calculate the Direct RVU for each activity.
Step :
List Activities Labor Supply Total
Column Total
Divide total sample indirect cost visit minute by the average given. minutes
Step A:
Add the column total above and divide it by the number of activities you have
Step B:
Divide the total for each activity in Step by the answer you got in Step A
Step C:
The calculations from Step B will become your Direct RVU.
Step : Calculate Total Direct RVU: Calculate the total projected direct RVUs by multiplying the direct RVUsactivity by the projected volumevisit
Activities RVU X Volume Total Direct RVU
Total
Calculate Direct Cost
Direct Cost divided by Column total for Total Direct RVU in the step above per RVU
Activities Direct RVU X Cost per RVU Direct Cost
Total Indirect RVU
Activities Divide by Visit minutes RVU X Projected Volume Total RVU
minutes is average
for all activities
Total
Calculate the Indirect Cost
Divide the indirect cost discussed in the word problem by the Total RVU above.
IndirectNumber Cost Per RVU
Number
Activities Indirect RVU X Cost Per RVU Indirect Cost
Total Cost
Activities Direct Cost Indirect Cost Total Cost x
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