Suppose you just found out that the $3,215 monthly malpractice insurance charge is based on an accounting allocation scheme that divides the hospital's total annual malpractice insurance costs by the total annual number of inpatient days and outpatient visits to obtain a per episode charge. Then, the per episode value is multiplied by each department's projected number of patient days or outpatient visits to obtain each department's malpractice cost allocation. Does this allocation scheme bias your breakeven analysis? (No calculations are necessary)

Question

Jordyn Cortez

Business

9 May, 15:00

Suppose you just found out that the $3,215 monthly malpractice insurance charge is based on an accounting allocation scheme that divides the hospital's total annual malpractice insurance costs by the total annual number of inpatient days and outpatient visits to obtain a per episode charge. Then, the per episode value is multiplied by each department's projected number of patient days or outpatient visits to obtain each department's malpractice cost allocation. Does this allocation scheme bias your breakeven analysis? (No calculations are necessary)

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Trevin Bennett · Answer 1

No, it does not bias break-even analysis as the calculation uses every activity in the hospital to get a certain amount of charge per activity. The calculations do not focus on a single activity nor is subject to a few activities but includes every activity by everyone in the hospital.