25 May Question Week 4 Homework Chapter 7: 7-1, 7-2, 7-3, & 7-4 Chapter 8: 8-1, 8-2, 8-3, & 8-4
Question
Week 4 Homework
Chapter 7: 7-1, 7-2, 7-3, & 7-4
Chapter 8: 8-1, 8-2, 8-3, & 8-4
7.1
Assume that the managers of Fort Winston Hospital are setting theprice on a new outpatient service. Here are relevant data estimates:
Variable cost per visit $ 5.00
Annual direct fixed costs $500,000
Annual overhead allocation $ 50,000
Expected annual utilization 10,000
- What per-visit price must be set for the service to break even? Toearn an annual profit of $100,000?
- Repeat Part a, but assume that the variable cost per visit is $10.
- Return to the data given in the problem. Again repeat Part a, but
assume that direct fixed costs are $1,000,000.
- Repeat Part a assuming both $10 in variable cost and $1,000,000in direct fixed costs.
7.2
The audiology department at Randall Clinic offers many services tothe clinic’s patients. The three most common, along with cost andutilization data, are as follows:
Service Variable Cost Annual Direct Annual # Visits
per Service Fixed Costs
Basic exam $5 $50,000 3,000
Advanced examination $7 $30,000 1,500
Therapy session $10 $40,000 500
- What is the fee schedule for these services, assuming that the goal is
to cover only variable and direct fixed costs?
- Assume that the audiology department is allocated $100,000 in
total overhead by the clinic, and the department director has al
located $50.000 of this amount to the three services listed above.What is the fee schedule assuming that these overhead costs mustbe covered? (To answer this question, assume that the allocation of overhead costs to each service is made on the basis of numberof visits.)
- Assume that these services must make a combined profit of $25,000 .Now what is the fee schedule? (To answer this question, assumethat the profit requirement is allocated in the same way as overheadcosts.)lied Laboratories is combining some of its most common
7.3
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