1. (16 Points) Pet Energy Therapy Association
(PETA) treats peoples’ pets, and has the following cost structure:
Charge per therapy session $300 Variable cost per therapy session $50
Fixed costs $200,000 They expect to perform 1,000 two hour session each
year (4/day, 5 days/week, 50 weeks/year).
A. Construct PETA’s profit and loss statement.
Revenue ($300 X 1,000) $300,000 Variable Costs ($50 X 1,000) 50,000
Contribution Margin $250,000 Fixed Costs 200,000 Profit (Loss) $50,000
B. How many sessions must PETA’s perform to breakeven? ______ Sessions.
C. To earn a profit of $100,000, how many sessions must they provide this year?
D. If there is one fulltime employee, who spends two hours on each session (and 1 hour for lunch), what would we need to assume about the additional sessions needed to earn $100,000?
B. How many sessions must PETA’s perform to breakeven? ______ Sessions.
C. To earn a profit of $100,000, how many sessions must they provide this year?
D. If there is one fulltime employee, who spends two hours on each session (and 1 hour for lunch), what would we need to assume about the additional sessions needed to earn $100,000?
2. (30 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 Documents Patient
Revenue Departments Record Keeping Cleaning Eye Care Dental Care
Department Costs $130,000 $100,000 $320,000 $600,000 Number of Employees
2 4 3 6 Number of Rooms 1 1 2 3
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? $______________
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 $994,000. An RVU analysis indicates the following:
Annual Average Appointments RVUs/appointment Cleaning 4,000 8 Check-Up
5,000 12 Full Service 2,500 20
A. Using RVU methodology, what is the cost for each type of appointment?
B. If the goal is a 20% profit margin, what should be the price for each type of appointment?
A. Using RVU methodology, what is the cost for each type of appointment?
B. If the goal is a 20% profit margin, what should be the price for each type of appointment?
4. (20 Points) Here are the 2014 revenues for
Nu-Kim Radiology for four different budgets: Static Budget Flexible
Flexible Enrollment&Utilization Budget Flexible Enrollment Budget
$50,000 $48,000 $42,000 Actual Results 47,000 Calculate the following:
a. Revenue Variance = $___________
b. Volume Variance = $_____________
c. Price Variance = $_____________
d. Enrollment Variance = $__________
e. Utilization Variance = $_____________
f. Give one sentence on what you would advise management about each variance:
1) Revenue Variance –
2) Volume Variance –
3) Price –
4) Enrollment Variance –
5) Utilization Variance
a. Revenue Variance = $___________
b. Volume Variance = $_____________
c. Price Variance = $_____________
d. Enrollment Variance = $__________
e. Utilization Variance = $_____________
f. Give one sentence on what you would advise management about each variance:
1) Revenue Variance –
2) Volume Variance –
3) Price –
4) Enrollment Variance –
5) Utilization Variance
