****PLEASE HELP WITH ALL CONCERNS BELOW**** Is it fair for the Dialysis Center t
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****PLEASE HELP WITH ALL CONCERNS BELOW****
Is it fair for the Dialysis Center to suffer in profitability, and hence for the department head to possibly lose his bonus, just because the Outpatient Clinic needs additional space? Provide justification for your position.
In the past, the medical center aggregated all facility costs and then allocated the total amount on the basis of square footage. This methodology assigned an average cost rate to each patient service department, regardless of whether its space is new or old, prime or poor. The proposed allocation for the Dialysis Center, on the other hand, requires it to bear the true facility costs of its new space.
What are the advantages and disadvantages of the new methodology?
Do you support the new allocation scheme? Provide justification for your position.
If the new allocation method for facility costs is implemented, what should be the facility allocation to the Dialysis Center in 20 years, when the loan (which is the basis for the higher cost allocation) has been paid off and there are no longer any actual facility costs? Provide justification for your position.
Explain how the revenue from medical (pharmacy) supplies is currently handled for profit and loss reporting purposes.
Is there a problem with the current system? Is there a better way of reporting this revenue? Explain.
When all issues related to the decision are considered, what is your recommendation regarding the final allocation amounts? Put your recommendation in the Excel spreadsheet provided for this case. Provide justification for your recommendation.
Enter the appropriate values into the red cells that currently contain a zero or hyphen. When this is done, any error cells will be corrected and the base case solution will appear. Note that the model does not contain any uncertainty analyses, so students will have to create their own if required by the case. Furthermore, students must create their own graphics output (charts) as needed to present their results. STUCASE03 4th edition Rio Grande [Compatibility Mode] Excel Ashley Boum - ? × Home Insert Page Layout Formulas Data Review View Help Tell me what you want to do Share Copy ?-?? Merge & Center · s-% , .00, o C Conditional Format as Cell Formatting TableStyles Styles Sort & Find& Filter Select Insert Delete Format ? , u . t-2.?. ?Clear. Format Painter Clipboard Alignment Number Cells L59 1 CASE 3 2 8/24/09 Student Version Copyright 2010 by FACHE RIO GRANDE MEDICAL CENTER Cost Allocation Concepts 6 This case focuses on cost allocation concepts, specifically the fairness and incentives created by 7 a new allocation system applied to a department that is moving to a new, stand-alone facility 8 The primary thrust of the case is qualitative rather than quantitative, but this model can be used 9 to compare results under altenative allocation schemes 11 The model consists of a complete base case analysis-no changes need to be made to the existing 13 section have been replaced with zeros. Thus, students must enter the appropriate values into the 14 red cells that currently contain a zero or hyphen. When this is done, any error cells will be comected 15 and the base case solution will appear. Note that the model does not contain any uncertainty 16 analyses, so students will have to create their own if required by the case. Furthemore, students 17 must create their own graphics output (charts) as needed to present their results 20 INPUT DATA. 21 22 Dialysis Center Data 23 KEY OUTPUT Dielysis CrOutpetient Ctr Totel CASE3Explanation / Answer
a) is it fair for fdialydis center to duffer in profitability- it is not fair forvdialysis to suffer in profitability beacause always there should be a category oof people or things or aadjustmennts should ddistribute to the clinics.because of additional space, there is a cchances of getting profit.dialysis center is always required for people and it is very importartant for patient.everyday one or the other patient needs dialysis center.sso tthere wil definfinayely shouldnot suffer with loss.they should earn money out of it.
B)here they are dividing the cost allocation between both the two clinics.and both the companies will be using same staff and same material equipment which wil help them to gain profit. This is the advantage for clinic.
The disadvantage will be - more patients wil visit the clinc where there is a good clinical facility.
My support is only for new scheme allocation because here in this scheme each and every clinic should show the true cost.it helps to see which clinic earned cost less or more.
C)if the new allocation method for facilities cost is implemented-after 20 years the clinic will see profit .revenue wil increase in the clinic as dialysis center is very important drpartment in clinc and many patient required this facility, difinately there will be a profit for the clinic after 20 years.and also the dialysis clinic will provide some amount of profit to the hospital which wil become profit to the hospital and clinic.
D)how the revenue from medical supplies is currently handled for profit or loss reporting purpose- here dialysis center wil enter each and evry facility which is provided to patient as a revenue and then they wil deduct that as a expenses.
F)any other way to report revenue.-i feel this report scheme is appropriate if the facility cost are assigned and represent the true costs of the facility each pqyient. Service uses.the current system of facility allocation will equally distributed the cost of all activities and it helps to avoid the problem which is inherited to the nee method.as doalysis crnter provide its profit to the hpdpital the revenue will be booked on the supplies. This would provide justification for the allocation of the overheaf costs on clinic supplies revenue
What is your recommendation regarding the final allocation amounts-always the dialysis center revenie will fall down when the clinic charge is takenout.
Here dialysis center revenue fall to $1900000 when clinic charge is $22700000-$370000=1900000.
The reduction in general overhaead allocation to the dialysis center is=here it is given as 10% of general overhead so ot will be
$2270000 of 10%=227000
$1900000OF 10%=190000
Must be offset by increase of general allocation to the outpatuent clinic would be
$2270000+370000=2640000
The facility cost within the outpatient clinic would be
$2270000+$370000=1900000
The total square footage for all department is $20000 and the new allocation rate is$1900000 and the per square foot allocation is $15
So $15*1000000sq feet =1500000 sq foot
Allocation for the dialysis center is 15*20000=300000sq foot
Total rrvenue is 1900000.22700000
Sq footage wil be- 20000. 370000.
Over all it would be more fair if clinic reallocate scheme for all patient service department instead of confirming changes to only outpatient services.dialysis center wil get a profit for the pharmecy drugs sold and used by the patient,it wil definately shows the profit for the clinc and it wil provide amount of profit to hospital where the revenue sales will increase in hospital.
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