2. Assume that the “target cost” is the average cost of a physical exam in local physician offices, which is $200. Does the initial plan meet the target cost? 3. If the initial plan does not meet the target cost, what elements could be redesigned to help meet this target? 4. What other factors might affect the decision to proceed with the Health Train?
Added by Michael M.
Step 1
- Determine the cost of the physical exam as proposed in the initial plan (this value should be given or calculated based on the plan details). Show more…
Show all steps
Your feedback will help us improve your experience
Adi S and 71 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Chapter 11 - Economic Analysis EXERCISES Use the following information to do a cost-effectiveness analysis of a work site screening program: Factor A is an early predictor of Disease 47, a serious health problem, and it is measurable by a blood test. As the level of Factor A increases, the risk of contracting Disease 47 increases, particularly for individuals with values of Factor A greater than 350 mg per deciliter of blood. Disease 47 treatment is expensive. For example, a death from the disease costs $45,000 and a nonfatal case costs $94,000 on average. For purposes of this analysis, assume that the expected lifetime benefits from averting Disease 47 for persons less than 60 years old, who lower their level of Factor A by 5%, are equal to a present value of $83. This figure represents the present value of healthcare dollars saved as a result of cases of Disease 47 averted in the population lowering their Factor by 5%. Most individuals do not suffer from Disease 47, so the average cost saved over many people is quite low. These lifetime costs can be compared to the costs of an intervention to lower Factor A. One way of reducing the costs of prevention interventions is to provide an intervention at the work site. This would consist of two parts: 1) initial screening for all participants; and 2) a special intervention for those whose Factor A is found to be 350 mg/dl or greater. The data in Table 11.1 represent the costs for an initial Factor A screening program. Table 11.1 Factor A Initial Screening Program Resources (per screener) for each screening Session Preparation Time 12.4 hours Travel Time to/from site 1.3 hours Time on Site 6.4 hours Follow-up Time 7.8 hours Average Number of Screenees Per Session 250 Supply Costs $1000 Mail/Phone $150 Average Salary of Screener, Including Fringes $65,000 Annual Hours Worked per Screener 2080 Number of screeners 4 Costs for the special intervention were calculated to be $75 per individual receiving the intervention. Effects on Factor A, obtained from the baseline and 12-month rescreening of all program participants whose initial values were 350 mg/dl or greater were: Initial Screening Only 1.9% reduction Initial Plus Special Intervention 5.3% reduction The first step is to compute the cost for each screener per hour. Screener Cost per Hour = Average Salary of Screener/Hours Worked by Screener = $65,000/2080 = $31.25/hour To answer the questions below, the first step is to create a table to determine per screener cost for the program. Activity Cost per Unit # of Units Total Cost Prep Time $31.25/hour 12.4 hours $387.50 Travel Time $31.25/hour 1.3 hours $40.63 Time On-Site $31.25/hour 6.4 hours $200.00 Follow-Up Time $31.25/hour 7.8 hours $243.75 Supply Costs $1000 Mail/Phone $150 Total Costs per Screener $2,021.88 With 4 screeners, the total cost for screeners = $2,021.88 * 4 = $8,087.52 11-1 How much did it cost, per person screened for the initial Factor A testing? NOTE: Screeners get paid for their travel time. 11-2 How much did it cost for each person who participated in the special intervention as well as the initial screening? 11-3 What is the cost per percentage reduction in Factor A for the initial screening only and for the initial plus special screening? 11-4 What is the marginal cost per percentage additional reduction in Factor A attributable to the special intervention?
Adi S.
Anand J.
To decide whether Vivita should implement Project Wapple, we first need to estimate the potential profit impact due to better segmentation of the risk pool. For simplicity, let us focus on one set of term life insurance customers: 30 to 35-year-old non-smoking males. Currently, Vivita sells this group a standard-priced policy costing $100 per year that pays out $100,000 if the policyholder dies within that year. Project Wapple would offer new sign-ups who volunteer for this program (called "opt-ins") a 20% discount on premiums if they purchase a fitness tracker and engage in at least moderate physical activity throughout the year. Premiums for new sign-ups who "opt out" would remain unchanged. Which five of the following would we need to forecast for the next year in order to estimate the potential change in annual profit if Project Wapple were introduced, versus if it were not? 1. Total volumes (i.e., number of policies) sold if Project Wapple were not introduced 2. Likelihood of claims (averaged among opt-outs and opt-ins) under Project Wapple 3. Likelihood of claims for opt-outs 4. Average revenue per policy (averaged among opt-outs and opt-ins) under Project Wapple 5. Likelihood of claims for opt-ins
Akash M.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD