Question 1
A dermatology clinic expects to contract with an HMO for an estimated 160,000 enrollees. The
HMO expects 1 in 4 of its enrolled members to use the dermatology services per month.
At the end of the year, the dermatology clinic's business manager looked at her monthly figures
and saw that the number of enrolled members had increased by 5% over the budgeted amount,
and that 1 in 3 of the total HMO members had used the dermatology services per month.
Actual and budgeted statistics are presented below. The total variance is $120,000 and is
unfavorable:

Budgeted
Enrollees
160,000
Usage Rate
0.25
Visits
40,000
Cost
$440,000
Cost Per Visit
$11.00

Question 2
Determine the enrollment variance for the month.

Actual
168,000
0.3333
56,000
$560,000
$10.00

Question 3
Determine the utilization variance for the month.

Question 4
Determine the efficiency variance for the month.

Question 5
Your hospital has billed charges of $10,000,000 in February. If your collection experience
indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent
in the third month, and 5 percent in the fourth month, determine the following values:

a) Net patient revenue for February
b) Collections of February charges in February
c) Net accounts receivable at the end of March for February billings


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

15,000
$600,000
$120,000

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
Blue Cross
Unity PPO
Kaiser
Self Pay

Volume %
20
15
10
5
50%

Discount %
4
10
10
40

Question 6
What rate must be set to generate the required $120,000 in profit in the preceding example?

Question
If the forecasted volume increased to 18,000 procedures and budgeted costs increased to
$684,000, while all other variables remained constant, what price should be established?

Question 7
Assume that the only change in the original example data is that Blue Cross raises their discount
to 20 percent. What price should be set?