Key concept:
How to compute cost per procedure with relative value units
During 2015, Black Lab had revenues of $2, 100,000 and expenses of $ 1, 800,000, which resulted in a net income of $300,000. An engineering time an study of lab procedures resulted in the following estimates:
Procedure Estimated Volume Labor Cost per Procedure
A 1,000 $0.10
8 2,000 $0.03
C 4.000 $0.05
D 7,000 $0.08
E 8,000 $0.06
F 10.000 $0.05
What is average cost per procedure (simple arithmetic average) under the assumption that all procedures are roughly equivalent?
Using the previous data, calculate the relative value units (RVUs) and cost per procedure.