Economics Homework Help

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points.

Problem 1. Formulate your answer based on the below information. The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances.
	Budget	Actual
Inpatient Costs	$12,568,500	$16,618,350
Members	42,000	42,000
Admission Rate	0.070	0.095
Case Mix Index	0.90	0.85
Cost per Case (CMI = 1.0)	$4,750	$4,900

Problem 2. Based on the information below, what rate must be set to generate the required $80,000 in profit in the preceding example?

You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

Budgeted Procedures	10,000
Budgeted Cost	$400,000
Desired Profit	$80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer	Volume%	Discount%
Blue Cross	20	4
Unity PPO	15	10
Kaiser	10	10
Self Pay	5	40
	50%

Problem 3. What is the amount of variance that is attributed to the difference between the budgeted and actual wage rate per hour?
Use the following data to calculate the variances.
The following information has been prepared for a home health agency.

	Budget	Actual
Wage Rate per Hour	$16.00	$17.00
Fixed Hours	320	320
Variable Hours per Relative Value Unit (RVU)	1.0	1.1
Relative Value Units (RVUs)	1,000	1,200
Total Labor Hours	1,320	1,640
Labor Costs	$21,120	$27,880
Cost per RVU	$21.12	$23.23

Budgeted costs at actual volume would be $25,344 ($21.12 × 1,200), and the total variance to be explained is $2,536 Unfavorable ($27,880 – $25,344). Be sure to specify whether the variance is favorable or unfavorable.