Referring to the Information Given, When Will Payback Occur? to Justify

question 53

Multiple Choice

Referring to the information given, when will payback occur? To justify the purchase of a new release of information tracking system, Health Information Management Services wants to calculate the new system's payback period. The cost to operate the current system is $25,000 per year. The proposed cost of the new system for the first year is $35,000 with continuing operating costs per year of $15,000. An increase of $10,000 per year in billing is anticipated with the new system because of .the addition of a billing component to the release of information tracking component. The data are summarized in the table below.

Cumulative difference in costs

• A) First year
• B) Second year
• C) Third year
• D) Fourth year

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Definitions:

Performance Rating

An evaluation measure used to assess the efficiency, effectiveness, or output level of employees, processes, or equipment against predefined standards.

Observed Time

The actual amount of time recorded for a task or process operation based on direct observation.

Futures Contract

A legally binding contract for the future transaction of goods or assets at a set price and predetermined date.

Cash Flows

Cash flows represent the net amount of cash and cash-equivalents being transferred into and out of a business, crucial for assessing its financial health, liquidity, and solvency.