Your firm has $45.0 million invested in accounts receivable, which is 90 days of net revenues. If this value could be reduced to 50 days, what annual increase in income would your firm realize if the increase in cash could be invested at 7.5 percent?

Use the following information to answer questions:

 

 You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

  

Number of Budgeted Procedures  $10,000

Budgeted Cost  $400,000

Desired Profit  $ 80,000

  It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

  Payer                  Volume %      Discount %

 Blue Cross          20                        4

 Unity                    15                        10

 Kaiser                  10                       10

Self-Pay                5                        40

    

                           50%

  

 

2. If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?

3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?

Answer rating: 100% (QA)

1 Calculate the annual increase in income from reducing accounts receivable from 90 days to 50 days Given data Initial investment in accounts receivable 450 million Initial days of net revenues collec... View the full answer