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Assignment Exercise 7-1

Health Care Finance: Basic Tools For Nonfiancial Mangers, Fifth Edition Judith J. Baker, R. W. and Neil R. Dworkin

Assignment Exercise 7-1

 

Assignment Exercise 7-1 (p. 532) – Allocating Direct and Indirect Costs

  AE7-1 Worksheet (doc) 

 

Practice Exercise 7-1: Identify Direct and Indirect Costs

Make a worksheet with two columns: Direct Cost and Indirect Cost. Place each of the following items in the appropriate column:

Managed Care marketing expense

Real estate taxes

Liablility insurance

Clinic telephone expense

Utilities (for the entire facility)

Emergency room medical supplies

 

Assignment 7-1: Allocating Indirect Costs

 

Study Table 7-1 Table 7-2, and review the chapter text describing how the indirect cost is allocated. This assignment will change the allocated bases input (A) Number of Visits (Volume), (B) Proportion of Directs Costs, and (C) Number of Computers in Service.

 

Required

Compute the costs allocated to cost centers “Clerical Salaries, ” Administrative Salaries,” and “Computer Services” using the new allocation bases shown below. Use worksheet #1 that replicates the set up in Table 7-2. Total the new results. 

 

 

The new allocation bases are: Allocation Key:

A= # Visits (Volume): PT=9,600/OT=4,000/ST=2,400/Total=16,000(16,000 x $3.50=$56,000)

B= Proportion of Direct Costs: PT=60%/OT=25%/ST=15%/Total =100%(%x$55,000)

C= #Computers in Service: PT=10/OT=3/ST=3/Total = 16 (16x$5,000 each = $80,000)

 

 

 Using worksheet #2 that replicates the set up in Table 7-1 , enter the new direct cost and the new totals for indirect costs resulting from your work. Total the new results.

 

 

 

 

SCIENCE
HEALTH SCIENCE
NURSING
FINANCE 610-ON35-F

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