Problems - Solve the following. Show your work!

1. (15 Points) Pet Energy Therapy Association (PETA) treats peoples' pets, and has the following cost structure: Charge per therapy session $150 Variable cost per therapy session $ 30 Fixed costs $100,000 They expect to perform 2,000 two hour session each year (8/day, 5 days/week, 50 weeks/year).

A. Construct PETA's profit and loss statement.

B. How many sessions must PETA's perform to breakeven? Sessions.

C. To earn a profit of $60,000, how many sessions must they provide this year?

Sessions.

2. (21 Points) St. Payne Med Center is using the step-down method to allocate costs. They have two support departments (Record Keeping and Cleaning), and two patient service departments (Eye Care and Dental Care). Some of the Record Keeping costs are allocated to Cleaning before the support department costs are allocated to patient service departments. Record Keeping costs are allocated based on the number of employees, while Cleaning costs are allocated by the number or rooms. The following data has been collected: Support Departments Patient Revenue Departments Record Keeping Cleaning Eye Care Dental Care Department Costs $ 15,000 $13,000 $32,000 $60,000 Number of Employees 2 4 5 6 Number of Rooms 1 1 4 6

a. What amount of the Record Keeping is allocated to Cleaning? $

b. What amount of the Record Keeping is allocated to Eye Care? $

c. What amount of the Record Keeping is allocated to Dental Care? $

d. What amount of the Cleaning is allocated to Eye Care? $

e. What amount of the Cleaning is allocated to Dental Care? $

f. After Allocation, What are Eye Care's total costs? $

g. After Allocation, What are Dental Care's total costs? $

3. (16 Points) Dental Diversity provides three basic service appointments; Cleaning, Check-up, and Full service. Total annual costs average $840,000. An RVU analysis indicates the following: Annual Average Appointments RVUs/appointment Cleaning 6,000 4 Check-ups 7,250 6 Full Service 3,750 10

A. Using RVU methodology, what is the cost for each type of appointment?

B. If the goal is a 33.33% profit margin, what should be the price for each type of appointment?

4. (20 Points) Here are the 2015 revenues for Nu-Kim Radiology for four different budgets: Flexible Flexible Static Enrollment & Utilization Enrollment Actual Budget Budget Budget Results $200,000 $204,000 $176,000 184,000

Calculate the following: a. Revenue Variance =

b. Volume Variance =

c. Price Variance =

d. Enrollment Variance =

e. Utilization Variance =

f. Interpret each variance: 1) Revenue Variance -

2) Volume Variance -

3) Price -

4) Enrollment Variance -

5) Utilization Variance -

6) Overall -