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Greenview Hospital operated at 120% of normal capacity in two of its departments during the year.

Greenview Hospital operated at 120% of normal capacity in two of its departments during the year. It operated 120% times 20,000 normal capacity direct labor nursing hours in 498499routine services and it operated 120% times 20,000 normal capacity equipment hours in the laboratory. The lab allocates overhead by measuring minutes and hours the equipment is used; thus equipment hours.
For Routine Services Nursing:• 20,000 hours × 120% = 24,000 direct labor nursing hours. • Budgeted Overhead at 24,000 hours = $42,000 fixed plus $6,000 variable = $48,000 total. • Actual Overhead at 24,000 hours = $42,000 fixed plus $7,000 variable = $49,000 total. • Applied Overhead for 24,000 hours at $2.35 = $56,400.
For Laboratory:• 20,000 hours × 120% = 24,000 equipment hours. • Budgeted Overhead at 24,000 hours = $59,600 fixed plus $11,400 variable = $71,000 total. • Actual Overhead at 24,000 hours = $59,600 fixed plus $11,600 variable = $71,200 total. • Applied Overhead for 24,000 hours at $3.455 = $82,920.Required
1. Set up a worksheet for applied overhead costs and volume variance with a column for Routine Services Nursing and a second column for Laboratory. 2. Set up a worksheet for actual overhead costs and budget variance with a column for Routine Services Nursing and a second column for Laboratory. 3. Set up a worksheet for volume variance and budget variance totaling net variance with a column for Routine Services Nursing and a second column for Laboratory. 4. Insert input data from the Assumptions. 5. Complete computations for all three worksheets.

Assignment Exercise 17–2: Three-Level Revenue Forecast

Three eye-ear-nose-and-throat physicians decide to hire an experienced audiologist in order to add a new service line to their practice.* They ask the practice manager to prepare a three-level volume forecast as a first step in their decision-making.
Assumptions: for the base level (most likely) revenue forecast, assume $200 per procedure times 4 procedures per day times 5 days equals 20 procedures per week times 50 weeks per year equals 1,000 potential procedures per year.
For the best case revenue forecast, assume an increase in volume of one procedure per day average, for an annual increase of 250 procedures (5 days per week times 50 weeks equals 250). (The best case is if the practice gains a particular managed care contract.)499500
For the worst case revenue forecast, assume a decrease in volume of 2 procedures per day average, for an annual decrease of 500 procedures. (The worst case is if the practice loses a major payer.)
*Audiologists were designated as “eligible for physician and other prescriber incentives” as discussed elsewhere. Thus the new service line was a logical move.


Using the above assumptions, prepare a three-level forecast

Assignment Exercise 17–3: Target Operating Income

Acme Medical Supply Company desires a target operating income amount of $100,000, with assumption inputs as follows:• Desired (target) operating income amount = $100,000 • Unit price for sales = $80 • Variable cost per unit = $60 • Total fixed cost = $60,000
Compute the required revenue to achieve the target operating income and compute a contribution income statement to prove the totals.

Assignment Exercise 18–1: Estimate of Loss

You are the practice manager for a four-physician office. You arrive on Monday morning to find the entire office suite flooded from overhead sprinklers that malfunctioned over the weekend. Water stands ankle-deep everywhere. The computers are fried and the contents 500501of all the filing cabinets are soaked. Your own office, where most of the records were stored, has the worst damage.
The practice carries valuable papers insurance coverage for an amount up to $250,000. It is your responsibility to prepare an estimate of the financial loss so that a claim can be filed with the insurance company. How would you go about it? What would your summary of the losses look like?

Assignment Exercise 18–2: Estimate of Replacement Cost

The landlord carries contents insurance that should cover the damage to the furnishings, equipment, and to the computers, and the insurance company adjuster will come tomorrow to assess the furnishings and equipment damage. However, your boss is sure that the insurance settlement will not cover replacement costs. Consequently, you have been instructed to prepare an estimate of what has been lost and/or damaged plus an estimate of what the replacement cost might be. How would you go about it? What would your summary of these losses look like?

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