AHIP Exam AHM-520 Topic 6 Question 94 Discussion

Actual exam question for AHIP's AHM-520 exam

Question #: 94
Topic #: 6

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.

One likely way in which Investment Center X or Y could effectively increase its ROI is by

AFocusing only on increasing its total revenues

BIncreasing its controllable investments

CIncreasing total revenues, accompanied by a proportionate increase in operating income

DIncreasing expenses in order to increase operating income

Show Suggested Answer

Suggested Answer: B

by Enola at Aug 07, 2024, 01:54 AM

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Stevie

6 days ago

The key here is to maximize the return on the controllable investments. Option B seems like the logical choice, but I wonder if the exam is trying to trick us.

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Josue

14 days ago

Increasing expenses to boost operating income? That's like trying to lose weight by eating more. Option D is a definite no-go.

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Lenna

16 days ago

Hmm, focusing on increasing total revenues sounds tempting, but that doesn't necessarily improve the ROI. I think option C is the way to go - increase revenues and operating income proportionately to maintain the ROI.

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