REQUIRED:
Each student will take the role of a management accounting consultant and present your analysis and recommendations/conclusions. The paper should be written in fluent grammatical English. It should include a bibliography of referenced sources. Internet resources used should be acknowledged and fully referenced. Copies of internet materials used should be submitted separately (either in MSWord or PDF format) with the final paper. All references and sources must be properly acknowledged. A copy of the final paper should be retained by the author.
The case is rich in detail and management accounting issues. Whilst all the information provided is relevant to a greater or lesser extent, students could focus on the Activity Based Costing System and the questions asked. For example exhibits 2 and 3 are peripheral to the expected analysis and are provided to provide some context. Exhibits 4, 7& 8 may be more relevant to the analysis and exhibits 1, 5, 6 and 9 would be the most relevant overall. Student analysis and discussion should focus on the rationale for and impact of the split-cost accounting system, and, conclude with an open-ended discussion of the applicability of the approach to more complex comprehensive health care institutions and/or hospitals.
Case Study Analysis
1. Analyse the MEEI Case and determine how the MEEI administrators might use the information from the Activity Based Costing System?
Written Report or Essay
2. Based on your analysis of the MEEI Case (as per requirement 1), provide a report that answers the following questions:
a. What problems arose with the old per-diem costing system? How would the new Activity Based Costing System remedy these problems? How might it affect management's decisions in respect to patient mix?
b. What would be the difference between the budgeted 1977 routine care cost of the following procedures under the old accounting method and under the activity based costing system?
· a cataract operation;
· a tonsillectomy/adenoidectomy procedure;
· a laryngectomy and radical neck dissection.
What accounts for the differences? Are they significant?
Provide a schedule of supporting calculations to support your answer. Where appropriate, calculations should be to three decimal places.
c. Using the hypothetical data given by Ms. Arndt, how could a hospital using a per diem reimbursement lose revenue and how much revenue would it lose? In comparison would MEEI lose revenue using the Activity Based Costing System (the split-cost accounting system)? Provide schedules of supporting calculations to support your answer. These schedules would include a flexible budget based on Ms Arndt's suggested initial level of hospital activity, the standard cost and standard charge (using the same markup used in Exhibit 5) using both the per diem method and the split-cost (ABC) method, and as a minimum, the three data sets provided in Exhibit 9. Whilst not specifically required, you may find it useful to provide a graph of the outcome of each of the data sets. Where appropriate calculations should be to three decimal places.