Use the following data to calculate the variances in problem. Your hospital has

Question

Use the following data to calculate the variances in problem.

Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile:

The HMO in the above example has indicated that their doctors use less expensive joint implants. If this less expensive implant is used, your medical supply charges would be reduced by $2,000. What is the estimated reduction in variable cost?

Explanation / Answer

Average Variable Cost (AVC) = Variable Cost (VC) / Quantity (Q)
i think this is the formula i use, but then I i go to plug in numbers and realize that I dont have a quantity


Variable Cost percent (VC%) = Variable Cost (VC) / Sales Revenue (SR)

you can putt your on values ..this is a examp,le
80% = VC / 15,000
.80 x 15,000 = VC
12,000 = VC

I plug in these numbers and come out with a bigger number and not sure if I use $10,000 or $15,000 for the sales revenue. if this is even the right formula

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