New Outpatient Service

Homework 3.1, Chapter 7
a. Your hospital is considering offering a new outpatient service. Using the data below, determine the price needed to breakeven.
Variable cost per visit $8
Annual direct fixed costs $650,000
Annual overhead allocation $70,000
Expected utilization (visits) 10,000
b. Assume now that the CEO is requesting to know what price must be set in order to earn a $100,000 profit. What price must be set in order to meet this desired profit level?


Allied Laboratories is combining some of its most commom tests into a bundled, one-price package called TEST X that contains three tests (A, B, and C) with the variable costs as stated below. When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are requried).
Syringe $3.50 $3.50 $3.50
Blood Vial 1.25 1.25 1.25
Forms 0.25 0.25 0.25
reagents 2.00 0.85 1.25
Bandage 0.15 0.15 0.15
Breakage/loss 0.10 0.10 0.10
Using the above information, complete the following table and answer the questions below:
Supplies A B C # Supplies needed for TEST X Combined supply costs for TEST X
Blood Vial
a. What is the price of the combined test?
b. What price is needed to obtain a $10 b. contribution margin?

Assume that a primary care physician practice performs only physical examinations, with three different levels, depending upon the depth and complexity of each exam. An RVU analysis determined the required RVUs for each exam as indicated below. The total costs to run the practice, including diagnostic, as well as the annual projected number of examinations for each level are also listed below.
Exam RVU’s # Exams
Level I 25 3,000
Level II 30 1,500
Level III 45 750
Total exams 5,250
Total costs $800,000
a. Using RVU methodology, what is the estimated cost per RVU?
Cost per RVU
b. What is the estimated cost per type of exam?
Level I
Level II
Level III
c. Based on the cost per exam, what is the estimated annual cost for each exam?
Total Costs
Level I
Level II
Level III

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