Provide detailed descriptions and show all calculations used to arrive at solutions for the following questions:
1. Your firm has $45.0 million invested in accounts receivable, which is 90 days of net revenues. If this value could be reduced to 50 days, what annual increase in income would your firm realize if the increase in cash could be invested at 7.5 percent?
Use the following information to answer questions 2 and 3:
You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:
Number of Budgeted Procedures 10,000Budgeted Cost$400,000Desired Profit$ 80,000
It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:
PayerVolume %Discount %Blue Cross
20
4
Unity
15
10
Kaiser
10
10
Self-Pay
5
40
50%
2. If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?
3. Assume that the only change in the original example data is that Blue Cross raises their discount to 20 percent. What price should be set?