accounting

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The Mountain View Senior Adult Program (MVSAP) is interested in starting a visiting
nurse program. The program would use licensed practical nurses to make home visits once a week to full-pay clients in the community. The MVSAP will
treat the visiting nurse program as a profit center. If the visiting nurse program is
successful and profitable, the profits will be used to expand the program to partialpay
and no-pay clients during the second year of operation. The executive director
is not sure how best to implement the program. She has two major alternatives.
The first alternative is to hire a small number of nurses and make them full-time
employees. The second alternative is to contract with several nurses who would be
interested in working part-time. To help in thinking through this financial management
decision situation, the executive director decides to compute a series of
BEPs based on contracting for the service and based on hiring one, two, and three
full-time nurses.
The executive director makes the following assumptions about the new visiting
nurse program:
n The price of the service will be set at $65 per visit.
n One full-time nurse position can provide a maximum of 120 one-hour visits
per month.
n If the service is contracted, the agency plans to pay the contract nurses at the
rate of $45 per visit including the cost of supplies.
n If the agency hires the nurses, the monthly salary will be $4,000 and the
agency plans on spending an average of $10 per client per visit for supplies.
n Regardless of the method of service delivery (direct or contract) and regardless
of the number of nurses hired, the agency plans to charge (allocate)
$4,000 per month in indirect costs to the visiting nurse program.
Compute four annualized BEPs assuming the following: (1) the service is
contracted, (2) one full-time nurse is hired, (3) two full-time nurses are hired, and
(4) three full-time nurses are hired. What are the four BEPs? Why do these BEPs
differ? Are all of these BEPs feasible solutions? If you were the executive director of
the Mountain View Senior Adult Program, what method of service delivery (direct
or contract) would you use? Why?

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