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# Health Care Services Reimbursement In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling \$14,550,400. The Gastroenterology Clinic costs data for a 12-month period from...

## Health Care Services Reimbursement

In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling \$14,550,400. The Gastroenterology Clinic costs data for a 12-month period from January 2013 through December 2013 were reported as follows:

 Month, 2013 Number of Patient Visits Gastroenterology Clinic Costs, \$ January 6,755 945,700 February 6,620 946,660 March 5,834 880,934 April 6,228 927,972 May 7,554 944,250 June 7,620 914,400 July 7,136 949,088 August 7,440 959,760 September 6,453 942,138 October 5,325 825,375 November 5,588 854,964 December 7,020 961,740
1. Find the fixed and variable portion of costs using the high-low method.
2. Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.
3. Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.
4. In deciding to continue (or to discontinue) a service, which revenues currently do not cover total cost. Which is more important in the short run, variable cost or fixed cost? In the long run (with more service volume)? Why?

Length: 3â€“4 pages, excluding title page and references.

I need 4 pages, APA, 4-5 in-text citations, 4-5 references

Answered Same Day Jun 28, 2020

## Solution

Aarti J answered on Jun 30 2020
Health care Reimbursement
Course Name
Course Date
Studentâ€™s Name
HEALTH CARE REIMBURSEMENT        7
Health Care Service Reimbursement
Find the fixed and variable portion of costs using the high-low method
In the high low method, the cost with the highest number of patientâ€™s visits is subtracted by the lowest number of patients visits to calculate the variable cost as well as fixed costs. The high low method is used for the missed costs to calculate the proportion of variable cost and the fixed cost in the mixed cost.

Number of patients visits
Clinic costs
June
7620
914400
Oct
5325
825375
Difference
2295
89025
To calculate the variable cost:
(Total cost under high activity â€“ Total cost under low activity) / (High activity â€“ Low activity)
= (914400 â€“ 825375) / (7620 â€“ 5325)
= 89025 / 2295
= \$38.79
Fixed cost = Total cost â€“ (Number of visits * variable cost)
= 914400 â€“ (7620*38.79)
= 618813.73
Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.
Contribution margin = Total revenue â€“ variable cost
= 14550400 â€“ (38.79*79573)
= 14550400 â€“ 3086704
= 11463696
Contribution margin ratio = Contribution margin / Total revenue
= 11463696 / 14550400
= 78.79%
Per visit revenue = Total revenue / Total visits
=14550400 / 79573
= 182.86
Per visit cost = Total cost / Total visits
= 11052981 / 79573
= 138.90
Per visit operating income = (Total revenue â€“ Total cost) / Number of visits
= (14550400 â€“ 11052981) / 79573
= 3497419 / 79573
= 43.95
Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.
Contribution margin can be said as the revenue of the product deducting the variable cost. As per Knight, Contribution margin is the leftover revenue after deducting the variable cost of the product from the revenue of the product. This is the cost that is used to cover the fixed cost of the...
SOLUTION.PDF