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 partial pay 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:
„X The price of the service will be set at $65 per visit.
„X One full-time nurse position can provide a maximum of 120 one-hour visits per month.
„X 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.
„X 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.
„X 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?
Here is the rst of it can someone help me?????
„XThe price of the service will be set at $65 per visit.
„XOne full-time nurse position can provide a maximum of 120 one-hour visits per month.
„XIf the service is contracted, the agency plans to pay the contract nurses at the rate of $45 per visit including the cost of supplies.
„XIf 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.
„XRegardless 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?
I got it
To compute the four annualized Break-Even Points (BEPs), we need to calculate how many visits the program needs to generate each year to cover the total costs.
First, let's calculate the variable costs, which are costs that vary with the volume of services provided:
1) If the service is contracted:
The variable cost per visit is $45 (including supplies).
2) If one full-time nurse is hired:
The variable cost per visit is the nurse's monthly salary divided by the maximum number of visits per month.
Monthly nurse salary = $4,000
Maximum number of visits per month = 120
Variable cost per visit = $4,000 / 120
3) If two full-time nurses are hired:
The same calculation as above applies here, but with two nurses:
Monthly nurse salary = $4,000 * 2
Variable cost per visit = ($4,000 * 2) / 120
4) If three full-time nurses are hired:
Using the same calculation as above, but with three nurses:
Monthly nurse salary = $4,000 * 3
Variable cost per visit = ($4,000 * 3) / 120
Next, let's calculate the fixed costs, which are costs that remain constant regardless of the volume of services provided:
Indirect costs per month = $4,000
To calculate the annualized BEP, we need to multiply the variable cost per visit by the number of visits required to cover the fixed costs:
Annual BEP = Fixed costs / (Price per visit - Variable cost per visit)
Now, let's calculate the BEPs for each scenario:
1) Contracted service:
Annual BEP = $4,000 / ($65 - $45)
2) One full-time nurse:
Annual BEP = $4,000 / ($65 - ($4,000 / 120))
3) Two full-time nurses:
Annual BEP = $4,000 / ($65 - ($4,000 * 2 / 120))
4) Three full-time nurses:
Annual BEP = $4,000 / ($65 - ($4,000 * 3 / 120))
By calculating the above equations, you will find the four BEPs.
The reason these BEPs differ is because the variable cost per visit changes depending on the delivery method (contracted or hiring nurses) and the number of nurses hired. Additionally, the indirect costs remain the same.
Not all of these BEPs may be feasible solutions. Feasibility depends on the demand for the visiting nurse program in the community and the ability to generate the required number of visits to cover the costs. If the BEP is unrealistically high or the program cannot generate enough visits, it may not be feasible.
As the executive director, the choice between direct service delivery (hiring nurses) or contracting would depend on several factors, such as the availability of qualified nurses, the cost difference between hiring and contracting, the level of control and coordination desired, and the potential for future expansion. It would be important to weigh these factors and choose the method that best aligns with the organization's goals and resources.