Costing Methods

I need an explanation for this Mathematics question to help me study.

Nowicki 2017. Introduction to the Financial Management of Healthcare Organizations, Seventh Edition, Health Administration Press (5th or 6th edition is acceptable.

An example may be in Chapter 6.

I’ve attached the excel sheet below.

Part I – Job Order Costing

  1. Calculate the relative value and cost per selected lab procedure given the revenue and expense data in the given spreadsheet. Steps (1 – 2.3) identified in the spreadsheet align with those in the example in the text.
  2. With the given revenue per procedure, calculate the profit per procedure and the total profit (Cell J16)(Step 3).

Part II – Home Health Activity-Based Costing

1. Home Health wants to develop a product cost for the given home health visits using labor expense and supply expense to assign direct costs and visit minutes as a cost driver to assign indirect costs. Projected total costs for HH are in Row 5 of the spreadsheet. Assign costs to each visit using the data provided. Steps (1.1-2.7) identified in the spreadsheet align with those in the example in the text.

2. Calculate the revenue per procedure and the FSU HH total net profit (Step 3-Cell Q17).

3. Calculate the Net Profit Margin (Cell L4)

Part III – Home Health Breakeven Analysis

Calculate the breakeven point in Units and Dollars for each lab procedure (Step 4). Round the breakeven unit down to the nearest integer using the rounddown function.

  1. Calculate the Contribution Margin in Percent and Dollars (Step 5).

Part IV – Home Health Capitated Breakeven Analysis

The NC State Health Plan approached HH regarding their desire to have a plan add-on and capitate their members RN home health services (Row 7). They plan to charge $5 PMPM for their 87,000 beneficiaries. The fixed costs for HH would be 10 RN’s @ $125,000 each. Variable costs per RN visit are $30. HH would like a target profit of 18.5% of the total capitated revenue. What are the maximum number of visits (Cell W13) that will allow us to generate this target profit (Cell W12). [Hint: Calculate the Actual Profit (Cell W14) with 1 visit PMPY and then use the Goal Seek function to find the maximum number of visits. Place this amount in (Cell W15)].

All calculated cells must have verifiable formulas and not just numbers entered.


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