Task #6 Understanding Inventory

Assignment Exercise 8-1 FIFO and LIFO Inventory

     Study the FIFO and LIFO explanations in the chapter.

Required:

Compute ending FIFO inventory and cost of goods sold.

·       Assume $90,000 sales;

·       beginning inventory 500 units @$50;

·       purchases of 400 units @$50;

·       100 units @$65;

·       400 units @$80

1.     Also compute the cost of goods sold percentage of sales

2.     Compute ending LIFO inventory and cost of goods sold, using same assumptions.

3.     Also compute the cost of goods sold percentage of sales

4.     Comment on the difference in outcome

Project 1

Expenses are the costs that relate to the earnings of revenue.  Another way to think of expenses is as the cost of doing business.  Just as revenues represent the inflow into the organization, so do expenses represent the outflow- a stream of expenditures flowing out of the organization.

Direct cost can be specifically associated with a particular unit or department or patient. The critical distinction for the manager is that the cost is directly attributable.  Remember direct cost can be traced. Indirect cost, on the other hand, cannot be specifically associated with a particular cost object.

·        Complete Practice Exercise 5–1: Grouping Expenses by Cost Center

·        Complete Practice Exercise 6–1: Identifying Direct and Indirect Costs

Physician Office Revenue for Visit Code 99214 has a full established rate of $72.00. Of ten different payers, there are nine different contracted rates, as follows:

Payer                          Contracted Rate      

FHP                                    $35.70

HPHP                                   58.85

MC                                       54.90

UND                                    60.40

CCN                                     70.20

MO                                      70.75

CGN                                    10.00

PRU                                     54.90

PHCS                                   50.00

ANA                                    45.00

Rates for illustration only.

Required

1.      Set up a worksheet with four columns: Payer, Full Rate, Contracted Rate, and Contractual Allowance.

2.      For each payer, enter the full rate and the contracted rate.

3.      For each payer, compute the contractual allowance.

The first payer has been computed below:

               Full                  Contracted          Contractual
Payer     Rate       (less)        Rate         =      Allowance
FHP      $72.00                   $35.70                 $36.30