Cost Object:In a clinical laboratory in a small community hospital we currently refer specimens for free PSA (prostatic specific antigen) to a large commercial laboratory. A prominent physician on staff has requested that us to start doing the test in-house to improve turnaround time. To do this, we would need to offer a total PSA and a free PSA together. We currently perform the total PSA in-house. The physician states that if he can have timely results for the paired test, he estimates that it will eliminate the need to perform approximately 60 prostate biopsies a year.
Free PSA (cost activity / object) is available on equipment that we currently use under a reagent rental agreement (we pay only for reagents, as the cost of the equipment is rolled into the cost of the reagents). The vendor has quoted a price of $8.00 per test (not $8.00 per billable test) for free PSA reagents.
Issues to consider in evaluating the profitability of bringing the test ( Free PSA ) in house:1.Effect on direct cost.
2.Possible increase in indirect costs3.Re-evaluation of equipment costs(capital) may be needed4.Rate of re-imbursement from provincial gov. or Finance Dept.
5.Possible Intangibles to be factored into the decision6.Pricing the test7.Is it worth bringing in?Background:In the laboratory, managerial accounting includes activities such as micro-costing (the process of determining the actual cost of performing a billable procedure), performing analyses of services and equipment in order to evaluate their profitability, and budgeting (the compilation of expected...