Complete problems #$1,3,5,7,9$ all at once.Clearly show your work and provide a concise summary in a paragraph of the responses.

End$-$of$-$Chapter Problems

Assume that a radiology group practice has the following cost structure:

Fixed costs $=$$$500,000,$ Variable cost per procedure $=$$$25$

Furthermore, assume that the group expects to perform $7\mathrm{.}500$ procedures in the coming year.

a$.$ What is the group's underlying cost structure?

b$.$ What are the group's expected total costs?

c$.$ What are the group's estimated total costs at $5,000$ procedures? At $10,000$ procedures?

d$.$ What is the average cost per procedure at $5,000,7,500,$ and $10,000$ procedures?

$128$

Fundamentals of Healthcare Finance

$3.$ Suppose that General Hospital, a not$-$for$-$profit acute care facility, has estimated the following costs for its inpatient services:

Fixed costs $$10,000,000$

Variable cost per inpatient day $$200$

The hospital expects to have $15,000$ inpatient days next year.

a$.$ What is the hospital's underlying cost structure?

b$.$ What are the hospital's expected total costs?

c$.$ What are the hospital's estimated total costs at $12,500$ inpatient days? At $17\mathrm{.}500$ inpatient days?

d$.$ What is the average cost per inpatient day at $12,500,15,000,$ and $17,500$ inpatient days?

$4.$ Suppose that the Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $$100,000$ in direct costs during the year. These costs must be allocated to Ruger's three revenue$-$producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated a total of $$5$ million in revenues during the year. To support these clinical activities, the departments used $5,000$ total hours of housekeeping services.

a$.$ What is the value of the cost pool?

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

$5.$ Refer to problem $4.$ Assume that the three patient services departments are Adult Services, Pediatric Services, and Other Services. The patient services revenue and hours of housekeeping services for each department are as follows:

$\backslash$table$[[$Department$,$Revenue,Housekeeping Hours$],[$Adult Services,$$3,000,000,1,500],[$Pediatric Services,$1,500,000,3,000],[$Other Services,$500,{000}_{?},{500}_{?}$