Solved by a verified expert :TCO 3) When considering how changes in volume affect total
fixed costs, it is important to consider:
the relevant range
the variable cost per unit
price
both A and B
both B and C
Question 2. Question
:
(TCO 3) To maximize the amount of profit realized from a
rate increase, charges should be increased most in departments with:
High charge payer mix/high write-offs for bad
debt, charity, & discounts
Low charge payer mix/low write-offs for bad
debt, charity, & discounts
High charge payer mix/low write-offs for bad
debt, charity, & discounts
Low charge payer mix/high write-offs for bad
debt, charity, & discounts
Question 3. Question
:
(TCO 3) Your controller has told you that the marginal
profit of DRG 209 (major joint procedure) for a Medicare patient exceeds the
marginal profit for an average charge patient. Why might this occur?
High fixed costs of treatment
Low Medicare payment
High prices
Low prices
Question 4. Question
:
(TCO 3)
Your hospital has been approached by a major HMO to perform
all their DRG 225 cases (foot surgeries). They have offered a flat payment of
$8,000 per case. You have reviewed your charges for DRG 225 during the last
year and found the following profile:
Average Charge: $11,300
Average LOS: 4.5 Days
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Cost/Charge Variable Cost %
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Routine Charge $3,200 0.75 65
Operating Room 1,850 0.7 80
Anesthesiology 210 0.7 75
Lab 575 0.65 40
Radiology 275 0.65 50
Medical Supplies 3,220 0.6 85
Pharmacy 955 0.55 85
Other Ancillary 1,015 0.75 55
Total Ancillary $8,100 0.7 75
In the above data set, assume that the hospital’s
cost-to-charge ratio is 0.75 for routine services and 0.70 for Total Ancillary
services. Using this information, what would the average cost of DRG 225 be?
(Your answer might be slightly different due to rounding. Pick the closest.)
$7,613
$8,100
$7,613
$8,000
CORRECT $8,070
Question 5. Question
:
(TCO 3) David Jones, the new administrator for a surgical
clinic, was trying to determine how to allocate his indirect expenses. His
staff was complaining that the current method of taking a percentage of
revenues was unfair. He decided to try to allocate utilities based on square
footage of each department, administration based on direct costs, and
laboratory based on tests. Use the information in the chart below to answer the
question.
Square Footage Direct Expenses Lab Tests
Utilities 200,000
Administration 2,000 500,000
Laboratory 2,000 625,000
Day-op Suite 3,000 1,400,000 4,000
Cystoscopy 1,500 350,000 500
Endoscopy 1,500 300,000 500
Total 10,000 3,375,000 5,000
Based on the scenario above, what are the Day Op Suite’s
total expenses?
What are the Day Op Suite’s total expenses?
What are the Cystoscopy Department’s total expenses?
What are the Endoscopy Department’s total expenses
Question 6. Question
:
(TCO 3) Your hospital has been approached by a major HMO to
perform all their MS-DRG 470 cases (major joint procedures). They have offered
a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470
during the last year and found the following profile:
Average Charge $15,000
Average LOS 5 Days
Routine Charge $3,600 Cost/Charge 0.80 Variable Cost % 60
Operating Room 2,657 0.80 80
Anesthesiology 293 0.80 80
Lab 1,035 0.70 30
Radiology 345 0.75 50
Medical Supplies 4,524 0.50 90
Pharmacy 1,230 0.50 90
Other Ancillary 1,316 0.80 60
Total Ancillary $11,400 0.75 50
The HMO in the above example has indicated that their
doctors use less expensive joint implants. If this less expensive implant were
used, your medical supply charges would be reduced by $2,000. What is the
estimated reduction in variable cost?
Question 7. Question
:
(TCO 3) How are costs classified?
