Minimum Bid Basics And General University Questions

A Minimum Bid Bcbsparticularsmercyst Sebastiangeneral University Of

A. Minimum Bid BCBS Particulars Mercy St. Sebastian General University # of cases per year BCBS Reimbursement $ 22,000.00 $ 21,000.00 $ 24,500.00 Diagnostics per case $ 500,000.00 $ 350,000.00 $ 150,000.00 Diagnostics @30% $ 150,000.00 $ 105,000.00 $ 45,000.00 Professional Cases $ 1,000,000.00 $ 700,000.00 $ 300,000.00 Professional Cases @ 70% $ 700,000.00 $ 490,000.00 $ 210,000.00 Amount of reimbursement $ 11,000,000.00 $ 7,350,000.00 $ 3,675,000.00 Total Payment $ 1,522,000.00 $ 1,071,000.00 $ 474,500.00 Implantable Device per case $ 2,500,000.00 $ 1,750,000.00 $ 675,000.00 Allocated overhead costs $ 3,750,000.00 $ 2,975,000.00 $ 1,350,000.00 Other variable costs $ 1,250,000.00 $ 840,000.00 $ 354,000.00 Post acute care facility costs $ 2,250,000.00 $ 1,575,000.00 $ 675,000.00 Homecare and follow-up costs $ 350,000.00 $ 245,000.00 $ 105,000.00 Total Variable costs $ 10,100,000.00 $ 7,385,000.00 $ 3,150,000.00 Min. total variable cost of bid $ 10,100,000.00 $ 7,385,000.00 $ 3,150,000.00 Contribution $ 11,622,000.00

B. Lowest Bid Particulars Mercy St. Sebastian General University Contribution $ 1,500,000.00 $ 1,015,000.00 $ 975,000.00 Profit on sales $ 2,320,000.00 $ 1,680,000.00 $ 825,000.00 Fixed Costs $ (820,000.00) $ (665,000.00) $ 150,000.00 Contribution Margin Ratio Variable Cost $ 10,100,000.00 $ 7,385,000.00 $ 3,150,000.00 Minimum amount to be bid $ 9,280,000.00 $ 6,720,000.00 $ 3,300,000.00

Problem b 05.06 Partial information follows about net sales, net purchases, cost of goods sold, gross profit, total expenses, and net income for Slabaugh Company. Compute the missing values. NET SALES Sales $ 800,000 Sales discounts 20,000 Sales returns and allowances ? Net sales 735,000 NET PURCHASES Purchases $ 400,000 Freight-in 20,000 Purchase discounts ? Purchase returns and allowances 2,500 Net purchases 413,500 COST OF GOODS SOLD Beginning inventory $ 85,400 Ending inventory 74,500 Cost of goods sold ? GROSS PROFIT Gross profit ? TOTAL EXPENSES Rent $ 36,000 Salaries 145,700 Utilities 12,300 Freight-out ? Other 24,100 Total expenses 242,200 NET INCOME Net income ? &R&"Myriad Web Pro,Bold"&20B-05.06 B-05.06 Worksheet b 05.06 Sales $ 800,000 Less: Sales discounts $ 20,000 Sales returns and allowances 45,000 Net sales $ 735,000 &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-05.06 B-05.06 This problem presents an excellent opportunity to use the solver function. It is found on the Data tab under the Analysis group. (Note: You may need to enable the solver add-in in the Excel options.) In older versions of Excel, this function is called goal seek and is found in the Excel tools menu.

For example, one would construct the basic structure and formulas as shown for the net sales calculations. Then, launch goal seek and set cell "E6" to equal the known value of "$735,000" by changing the unknown cell D5. The value to input into cell D5 is calculated automatically. You are encouraged to experiment with the solver function/goal seek to solve this problem. Problem B.06.03 Dine-Corp International publishes ratings and reviews of the world's finest restaurants.

Following are facts you need to prepare Dine-Corp's March bank reconciliation: Balance per company records at end of month $ 72,644.12 Bank service charge for the month 44.00 NSF check returned with bank statement 1,440.66 Note collected by the bank during the month 45,000.00 Outstanding checks at month end 31,553.57 Interest on note collected during the month 4,500.00 Balance per bank at end of month 144,223.99 Deposit in transit at month end 7,989.04 &R&"Myriad Web Pro,Bold"&20B-06.03 B-06.03 Worksheet B06.03 Ending balance per bank statement $ 144,223.99 Add: - 0 Deduct: - 0 Correct cash balance $ - 0 End balance per company records $ 72,644.12 Add: $ - Deduct: - Correct cash balance $ - 0 &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-06.03 B-06.03 Problem b 7.11 Prepare journal entries for each of the following transactions: On December 1, 20X5, Musaka received a 10%, 1-year, note receivable from Lambert.

This note was issued in payment for a $24,000 outstanding account receivable. On December 31, 20X5, Musaka recorded an end-of-year adjusting entry to record accrued interest on the note receivable. On November 30, 20X6, Lambert paid Musaka the full amount due on the note receivable. How would the November 30 entry differ if Lambert defaulted on the payment? &R&"Myriad Web Pro,Bold"&20B-07.11 B-07.11 Worksheet b 7.11 GENERAL JOURNAL Date Accounts Debit Credit Dec. 1 To record issuance of 10%, 1-year note, in exchange for outstanding receivable Dec. 31 To accrued interest on note ($24,000 X 10% X 1/12) Nov. 30 To record interest income (11 months) and collection of note receivable and previously accrued interest &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-07.11 B-07.11 Problem I 07.01 Rocks Shoes is a three-year old company that started out producing specialty shoes for rock climbing and mountaineering. The shoe's unique styling has made them a hit with climbing enthusiasts, and the company is now growing rapidly. Rocks needs additional capital to expand its manufacturing capacity, and it plans to sell additional shares of stock to raise money. During its first three years in operation, Rocks used the direct-write off method to account for uncollectible accounts.

Information about sales, write-offs, and the company's income follows: Sales Write-offs Net Income Year 1 $ 2,400,000 $ - $ 100,000 Year 2 6,300,000 Year 3 12,900,000 Rocks is required to have audited financial statements prior to offering its shares of stock for sale. This will require the company to recompute its income under generally accepted accounting principles for each of the three prior years. The only item that requires adjustment is the treatment of uncollectible accounts. Rocks estimates that 3% of sales ultimately prove to be uncollectible -- 1% in the year following a sale, and 2% in the year thereafter. (a) Prepare the journal entries that were used by Rocks for each year under the direct write-off method. (b) Determine if the actual write-offs are aligning with the estimates provided by Rocks.

Why does GAAP require an allowance method for uncollectibles? (c) Prepare the journal entries that would have been made each year had the percentage of sales technique been used to establish an allowance account. Be sure to include entries to both establish the allowance and record the write offs. (d) How much is the corrected net income for each year? Will the reduction in income potentially impact the amount of capital that can be raised? &R&"Myriad Web Pro,Bold"&20I-07.01 I-07.01 Worksheet I 07.01 (a) GENERAL JOURNAL Date Accounts Debit Credit Year 1 No Entry Year 2 Year 3 (b) (c) GENERAL JOURNAL Date Accounts Debit Credit Year 1 Year 2 Year 2 Year 3 Year 3 (d) &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20I-07.01 I-07.01 Problem B08.03 Elizabeth Egbert owns a galvanizing plant.

Customers bring in their fabricated steel products (like light poles, towers, trailers, etc.), and Egbert dips them into a heated vat of molten zinc. The zinc bonds to the metal and produces a highly durable corrosion resistant product. Egbert's primary inventory is molten zinc purchased from suppliers in large blocks of solid material. These blocks are immersed in the heated vat and will melt together with the zinc already in the pool. Egbert started the year 20X8 with 500,000 pounds of zinc in the pool. During the year Egbert purchased 2,800,000 pounds of zinc. At year's end, the pool contained 520,000 pounds of zinc. (a) How much zinc was used during 20X8? (b) Accountants frequently refer to "goods available for sale." Is this concept the same as ending inventory? How much zinc, in pounds, was "available for sale?" (c) If the beginning inventory cost $1.25 per pound, and purchases during 20X8 cost $1.50 per pound, how much is the "cost of goods available for sale"? (d) In preparing financial statements for 20X8, to what financial statement elements will the amount you calculated in part (c) be allocated? (e) If Egbert uses FIFO, how much should be attributed to ending inventory and how much to cost of goods sold? (f) If Egbert uses LIFO, how much should be attributed to ending inventory and how much to cost of goods sold? (g) What will be the difference in profitability between choosing the FIFO and LIFO methods? Does it seem reasonable the choice of accounting method can change the reported profit? &R&"Myriad Web Pro,Bold"&20B-08.03 B-08.03 Worksheet B08.03 (a) (b) (c) (d) (e) (f) (g) &L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-08.03 B-08.03 Case #3 Taking Risk as Providers – Total Joint Case Rate Your local BC/BS plan has experienced high costs and unpredictable cost increases for total joint replacement cases in recent years. They have approached three competing hospital systems about taking a case rate for total knee replacements. The ‘case rate’ will cover all diagnostic work, the surgery itself and all rehabilitation needed to get the patient back to full functionality.

Last year, BC/BS paid for 1000 total knee replacements in this region, and they project the same volume next year. The working assumption here is that the ‘winning’ bidder will get 100% of that volume next year. The current breakdown of BC/BS business at these three facilities is as follows: In addition to the hospital cost for these procedures, you can assume that BC/BS has also paid the following on average per case: · - Diagnostics (all) - $1,000 · - Professional (all) - $2,000 · - 30% of patients will require post-acute care at a rehab. facility at a cost of $15,000/case · - 70% of patients will go home with home care and other follow-up at a cost of $1,000/case Case Questions: A. Assuming that the cost/case figures above remain constant, what would be the minimum that each system could bid to garner the BC/BS business such that its costs would be covered (i.e., this would not be a money losing venture).

What happens to each hospital’s total profit if the winning bidder is awarded 100% of the volume? B. C. Mercy St. Sebastian University Total Knee Procedures/ year Current BC/BS hospital reimbursement/case $22,000 $21,000 $24,500 Allocated overhead cost/case $7,500 $8,500 $9,000 Implantable device cost/case $5,000 $5,000 $4,500 Other variable costs/case $2,500 $2,400 $2,300 The economic term, “contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs.

As an example, a movie ticket costs $10, and we determine that $2 of that goes to variable cost coverage, $6 to fixed cost coverage and $2 to profit. $8, then, would be the ‘contribution’ towards coverage of non-variable costs. Using the notion of ‘contribution’, is there a case to be made for one or more of the hospitals to lower their offered price to a level at which they’d receive negative total margin? Thinking in terms of marginal volume gained, what is the lowest each hospital could bid in this scenario? Suppose that a new entrant comes late to the bidding process, and plans a super competitive bid of $13,900 per case. This is a new orthopedic institute that is made up of several orthopedic surgical groups. They have their own diagnostic facilities and can bring all of the rehabilitation assets that they’ll need. They also have a direct relationship with a device manufacturer and believe they can cut the cost of devices used down to $2,500 per case. They only thing they lack are the actual surgical facilities. They offer to lease OR time from each of the hospitals at $2,400 per case. Are the hospitals likely to accept that offer? What happens to the economic profit of each hospital if they do/ do not accept the offer?