Problem 1: What is the goal of cost allocation? Fully describe 2 of the 3 methods. Be sure to discuss how these methods differ.
Problem 2: Why does Activity Based Costing hold so much promise for healthcare providers?
Problem 3: For the following questions, assume that a radiology group practice has the following costs:
- Fixed costs $500,000
- Variable cost per procedure= $25
A. Describe the group's underlying cost structure including how it would be calculated.
B. Now, assume that the group expects to perform 7500 procedures. What are the group's expected total costs?
C. What is the average cost per procedure at 7500 procedures?
D. Explain what happens to total cost if the group were to increase to 10,000 procedures (all else remains constant). What happens to the average cost per procedure and why?
Problem 4: Explain conventional and zero-based budgeting approaches. Be sure to provide pros and cons for both.