Question

Discussion Week 4

As the office manager of a large group practice you have two computational tasks to undertake today.

1. You need to run a Depreciation Computation: Units-of-Service

Using the format in Table 9–1, compute Units-of-Service Depreciation using the following assumptions:

Cost to be depreciated = $50,000

Salvage value = zero

Total units of service = 10,000

Units of service per year: Year 1 = 2,200; Year 2 = 2,100; Year 3 = 2,300; Year 4 = 2,200; Year 5 = 200

2. Next you need to calculate the FTEs needed next year to Annualize Staffing

To annualize your staffing plan, you need to convert the staff’s net paid days worked to a factor. The office is open and staffed seven days a week, due to your contracts with two managed care plans. The group practice pays for 8 holidays, 5 sick days, and 1 education day each year. An employee must work one full year to earn 5 vacation days. An employee must have worked full time for three full years before earning 10 annual vacation days. Because the turnover is so high, nobody on staff has earned more than 5 vacation days.

Required

   1. Compute Net Paid Days Worked for a full-time employee in the physicians’ group.

   2. Convert Net Paid Days Worked to a factor so you can annualize your staffing plan.

Answer 1

1
	Year	Book Value year start	Units of activity	Depreciation Exp.	Acc. Dep	Book Value year-end
	1	50,000	2,200	12,222	12,222	37,778
	2	37,778	2,100	11,667	23,889	26,111
	3	26,111	2,300	12,778	36,667	13,333
	4	13,333	2,200	12,222	48,889	1,111
	5	1,111	200	1,111	50,000	0
			9,000
	Depreciation per Units = (50,000 - 0)/9,000 = 5.5555 per unit of activity
2
	CATEGORY OF DAYS
	Total days: business year	364
	Less 2 days off per week	104
	Number of paid days per year	260
	Less: Paid days not worked
	Holidays	8
	Sick days	5
	Education days	1
	Vacation days	5
	Total non-productive days	19
1	Net productive days	241
2	Factor = 364/241 = 1.51037
	(Total days in the business year divided by net paid days worked)