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MBA 6100 CAse study problems




Question;MBA 6100;Fall 2014, Block 1;Case Study #1;Students are to submit one Excel file for this case with each problem;on a unique worksheet. All calculations must be clearly indicated/articulated;in your case preparation. You also must utilize formula functions where;appropriate.;Problem #1 ? DPN Health Systems ? CVP Analysis;DPN Health Systems operates a general hospital in;southern Delaware. The medical center also rents space and beds to separately;owned entities rendering specialized services, such as Stroke Rehabilitation;and Psychiatric Care. DPN charges each separate entity for common services;such as patients? meals and laundry, and for administrative services such as;billings and collections. Space and bed rental are fixed charges each year, based;on bed capacity rented to each entity. DPN Health Systems charged the following;costs to Stroke Rehabilitation for the year ended December 31, 2013;Patient days;Bed Capacity;(Variable);(Fixed);Dietary;$;700,000;Janitorial;-;$;80,000;Laundry;340,000;-;Laboratory;560,000;-;Pharmacy;400,000;-;Repairs and maintenance;-;35,000;General and administrative;-;1,420,000;Rent;-;1,750,000;Billings and collections;300,000;-;Total;$;2,300,000;$;3,285,000;During the year;ended December 31, 2013, Stroke Rehab charged each patient an average of $375;per day, had a capacity of 60 beds, and had revenue of $7.0 million for 365;days. In addition, Stroke Rehab directly employed personnel with the following;annual salary costs per employee: supervising nurses, $32,000, nurses, $23,500;and aides, $12,000.;DPN has the following minimum departmental;personnel requirements based on total annual budgeted patient days;Supervising;Annual;Patient-days;Nurses;Nurses;Aides;Up to 22,000;4;10;20;22,001 to 26,000;5;14;25;26,001 to 29,000;5;16;31;Stroke Rehab always;employes only the minimum number of required personnel. Salaries of supervising;nurses, nurses, and aides are therefore fixed within ranges of annual patient-days.;Stroke Rehab operated at 100% capacity on 90 days;during the year ended December 31, 2013. Administrators estimate that on these;90 days, Stroke Rehab could have filled another 20 beds above capacity. DPN has;an additional 20 beds available for rent for the year ending December 31, 2014.;Such;additional rental;would increase Stroke Rehab?s fixed charges based on bed capacity. (In the;following requirements, ignore income taxes).;Required;Calculate the;minimum number of patient-days required for Stroke Rehab to break even for;the year ending December 31, 2014, if the additional 20 beds are not;rented. Patient demand is unknown, but assume that revenue per;patient-day, cost per patient-day, cost per bed, and salary rates will;remain the same as for the year ended December 31, 2013.;Assume that;patient demand, revenue per patient-day, cost per patient-day, cost per;bed, and salary rates for the year ending December 31, 2014, remain the;same as for the year ended December 31, 2013. Prepare a schedule of Stroke;Rehab?s increase in revenue and increase in costs for the year ending;December 31, 2014. Determine the net increase or decrease in Stroke;Rehab?s earnings;from the additional 20 beds if Stroke Rehab rents this extra capacity from DPN;Health Systems.;Should Stroke Rehab rent the extra capacity?;Problem #2 ? Willer Company ? Product Costing;Willer Company is a;small computer component manufacturer. Several years ago, the company decided;to concentrate on only three models, which were sold under many brand names to;electronics retailers and mass-market discount stores. For internal purposes;the company uses the product names Sonic, Rapid, and Lightning to refer to the;three components.;The President of the company has issued the;following memo;I don?t understand this. In 2012, we decided to;drop our highest-end Sonic model and only produce the Rapid and Lightning;models, because our cost system indicated we were losing money on Sonic. Now;looking at preliminary numbers, our profit is actually lower than last year and;it looks like Rapid has become a money loser, even though our prices, volumes;and direct costs are the same. Can someone please explain this to me and maybe;help me decide what to do next year?;Data on the three models and selected costs;follow;For the year ended December 31, 2012;Sonic;Rapid;Lightning;Total;Units produced and sold;6,000;11,000;19,000;36,000;Sales price per unit;$;140.00;$;115.00;$;65.00;Direct materials cost per unit;$;75.00;$;60.00;$;25.00;Direct labor-hours per unit;2.5;1.5;1.0;Wage rate per hour;$;21.00;$;21.00;$;21.00;Total manufacturing overhead;$;700,000;For 2013, the;company only produced the Rapid and Lightning models. Total overhead was $625,000.;All other volume, unit prices, costs, and direct labor usage were the same as;in 2012. The product cost system at Willer Products allocates manufacturing;overhead based on direct labor hours.;Required;Compute the product cost and gross;margins (revenue less cost of goods sold) for the three products and total;gross profit for 2012. (Round your numbers to 2 decimal places);Compute the product cost and gross;margins (revenue less cost of goods sold) for the two products and total;gross profit for 2013. (Round your numbers to 2 decimal places)3.;Should;Willer drop Rapid for year 3? Explain (your explanation must include a;numerical analysis to support your position).;Hint: Total manufacturing overhead above includes both fixed and variable;costs. Use the high-low method to separate the Total Manufacturing Overhead;into variable and fixed costs and then analyze the Rapid model using;contribution margin analysis. I will give 2 points extra credit to anyone who;can explain how we know the manufacturing overhead includes both fixed and;variable costs.


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