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Managerial Accounting Case 8-2 Galloway University Medical Center-ANSWER KEY (INSTANT DOWNLOAD)

Managerial Accounting Case 8-2 Galloway University Medical Center-ANSWER KEY (INSTANT DOWNLOAD)
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Managerial Accounting by James Jiambalvo, 4th Edition


Case 8-2 Galloway University Medical Center has a top rated medical facility that draws patients from a three-state area. On the day of discharge from the GUMC hospital, most patients fill their prescriptions from the GUMC pharmacy. However, when it comes time to renew them, they turn to a local pharmacy because that is more convient than driving back to the GUMC pharmacy. To encourage prescription renewals, GUMC is considering offering either free overnight delivery or reduced prices on renewal orders. Currently, the GUMC pharmacy had revenue of $54,990,000 per year on 846,000 orders. The gross margin (price minus cost of drugs) is approximately 25%. Free overnight delivery is expected to cost $8 per order and result in 120,000 renewal orders per year. To deal with the increased volume, the pharmacy will need to hire two pharmacisits at $90,000 each per year and an additional staff person (to handle shipping) at $50,000 per year. Alternatively the pharmacy can generate 120,000 renewal orders per year by offering 20% off the prices of renewal orders. With this option, two pharmacists must be hired, but no additional staff person will be needed. 1.Assumptions drive the accounting projections. Do you have any questions regarding the assumptions used by Galloway University Medical Center Pharmacy in the planned change? 2. What is your recommendation for the proposed change?


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