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Finance
This area deals with the planning, development, establishment, analysis, and assessment of financial management processes for an organization's capital, budget, accounting, and related reporting systems.
May 2010
Sunday May 23, 2010
Posted by: Kevin Brooks at 2:45PM EST on May 23, 2010
University Hospital offers a screening test as a community service for $0.50 per test. Variable costs per unit are $0.32. Fixed costs are $43,200 per month for the department that performs the test. It is the only test done at the specialty department. The break-even point for the tests are:
1. 240,000 tests 2. 172,800 test 3. 135,000 test 4. 86,400 tests
Answer: 1 - break-even is a function of Total Fixed Costs / Contribution Margin. Contribution margin is the selling prices minus the variable cost per unit. 43,200/(0.50-0.32) = 240,000 tests Friday May 7, 2010
Posted by: James Adams at 12:12PM EST on May 7, 2010
When evaluating a decision to go forward with a project is there ever a time when you would consider a cash flow as not relevant ? Answer: Yes, for sunk cost (Fundamentals of Healthcare Finance; page 278)
A sunk cost refers to an outlay that has already occurred or has been irrevocably committed, so it is unaffected by the current decision to accept or reject a project. Sometimes a project will appear to be unprofitable when all of its associated costs are considered. However, on an incremental basis, the project may be profitable and should be undertaken. Thus, the correct treatment of sunk costs can be critical to the decision. |
