Medical Purchasing Agents (MPC) Is a Company That Represents Groups

question 229

Multiple Choice

Medical Purchasing Agents (MPC) is a company that represents groups of hospitals as their agents for purchasing medical supplies. MPC is able to obtain discounts for the hospital group because of their sheer volume needs when they are grouped together. MPC's CEO, CFO and general counsel own 51% of the stock of a company called Medi-Pump. Medi-Pump is the sole supplier to the hospitals for feeding pumps, IV pumps and other forms of hi-tech medical pumps and supplies. MPC has negotiated a low-cost supply contract from Medi-Pump to the hospitals. MPC:

• A) Has served its customers well with the Medi-Pump contract.
• B) Has a conflict because of its ownership of Medi-Pump.
• C) Cannot have a conflict so long as the Medi-Pump price is lowest.
• D) Cannot have a conflict because it represents groups of hospitals.
• E) None of the above

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated based on estimated costs and activity levels.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, based on expected activity levels.

Manufacturing Overhead

Expenses tied to the production process that do not include direct labor or materials are known as indirect costs.

Variable Costs

Variable costs are expenses that vary directly with the level of production or sales volume, such as materials and labor.