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Case Study # 3 Rj Grande Medical Center-Cost Allowance Concepts 1) Is it reasonable for the Dialysis Centre to go through (in profitability) from the push even though it experienced nothing to carry out with this? I do certainly not think that the Dialysis Center suffering in profitability through the move is fair. Being that the Dialysis Center was moved due to the Outpatient Clinics need for extra space, I do think that some of the costs of the fresh building and the relocation from the Dialysis Centre should be paid out through the Outpatient Center (a “buy out).

The fact that the indirect costs of the Dialysis Center are going up solely because of the fact that they had been forced to be able to accommodate the Outpatient Center, forcing these people into the crimson, is simply unjust and bad practice.

2) Should the Dialysis Center always be charged genuine facilities costs for its new location? After all, the approach was required by the Outpatient Clinic, which can be being charged pertaining to facilities on the lower normal allocation level.

Under the concept of charging for actual establishments costs, division heads may be better off resisting proposed ways to new (and potentially even more efficient) features because this sort of moves might result in increased facilities allocations. Without the development, the Dialysis Center was paying 300 dollar, 000 in facilities costs ($15 every square feet x 20, 000 sq feet). While using expansion, the Dialysis Middle is having to pay $400, 500 in features costs, hundred buck, 000 more solely as a result of move compelled upon them due to the Outpatient Centers requirement for more space.

I really believe that the Dialysis Center should certainly pay the same amount in services costs due to the fact they would have the same amount of square footage as they did before the move. Any at least a portion in the additional $100, 000 in facilities costs should be absorbed by the Outpatient Center, not simply did that they force the Dialysis Center out, but they also have an expected 25 percent increase in volume even though the Dialysis Center is anticipated to have no raises at all. 3)

Even if the authentic cost idea were applied to the Dialysis Center, is the 400, 500 annual allocation amount right? After all, home has a beneficial life that is probably substantially longer than 20 years ” the life of the loan utilized to determine the allocation volume. If the the case cost concept is applied, what would be the allocation inside the 21st yr, after the mortgage had been paid back? 4) The revenue the Dialysis Middle “receives via patient use of the drug-store appears to be transferred directly to the pharmacy.

That is certainly, the Dialysis Center ebooks $800, 1000 in total annual revenue then again is recharged $800, 000 for the drugs employed. Should this “revenue be counted once general expense allocations are manufactured? To make this point, John learned that the chemist supplies used for dialysis actually cost the pharmacy $400, 000, and so the pharmacy constitutes a profit of $400, 500 on drugs that are truly “sold by the Dialysis Center.