Search here for Tutorials
If the Data is different in your question, please send your questions to homeworksolutionsnow@gmail.com. The questions will be answered at the same price.

Rio Grande medical Center 5th Edition CASE 3 Questions

Rio Grande medical Center 5th Edition
CASE 3 Rio Grande medical Center 5th Edition
Rio Grande medical Center is a full service, not-for-profit acute care hospital with 325 beds located in Rio Grande, Texas. The bulk of the hospital’s facilities are devoted to inpatient care and emergency services. However, a 100,000 square-foot section of the hospital complex is devoted to outpatient services. Currently, this space has two primary uses. About 80 percent of the space is used by the Outpatient Clinic, which handles all routine outpatient services offered by the hospital. The remaining 20 percent is used by the Dialysis Center.
Key Issues
The key issue in the case is that due to growth in volume of the Outpatient Clinic a need for 25 per cent more space is created and thus the existing space is completely allotted to Outpatient Clinic and the Dialysis centre was moved to another location to free up space within the hospital complex. As a result of this additional $400,000 cost is incurred and this was allotted to both the centers based on square footage. There is an opinion that due to additional space required by outpatient centre the additional costs are incurred and Dialysis centre is not at all benefitted, the cost should be borne by Outpatient Centre.
Analysis
Taking in consideration all these inputs, Rick Simon can answer CEO’s questions as following:
1.      Is it “fair” for the Dialysis Center to suffer (in profitability) from the move even though it had nothing to do with it.
 2.      Should the Dialysis Centre be charged actual facilities costs for its new location? After all, the move was forced by the outpatient clinic, which is being charged for facilities costs, department heads might be better off resisting proposed moves to new (and potentially more efficient) facilities because such moves would result in increased facilities allocations.
3.      Even if the true cost concept were applied to Dialysis center, is the 400,000 annual allocation correct? After all the building has a useful life that is probably longer than 20 years, if the true cost concept is applied what would be the allocation in the 21st year, after the mortgage had been paid off?
4.      The revenue that the Dialysis center receives from patient use of the pharmacy goes to the pharmacy. The dialysis center book $800,000 in annual revenue but charge $800,000 for the drug. Should this 'revenue' be counted when general overhead allocations are made??  To make his point, John, the dialysis head, discovered that pharmacy supplies used for dialysis cost the pharmacy 400,000$, so the pharmacy makes a profit of 400,000$ on drugs that are actually sold by dialysis center.
Conclusion & Recommendations
 
TUTORIAL PREVIEW
1. Is it “fair” for the Dialysis Center to suffer (in profitability) from the move even though it had nothing to do with it.
No. It is not “fair” for the Dialysis centre to suffer in profitability on account of cost allocated to it which
 
FILE NAME: RIO GRANDE 5ed.xls  File Type: xls PRICE: $20