7.2. The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Basic examination Advanced examination Therapy session Variable Cost Annual Direct Annual Number Fixed Costs of Visits 3,000 1,500 500 per Service $5 7 10 $50,000 30,000 40,000 a. What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs? b. Assume that the audiology department is allocated $100,000 in total overhead by the clinic, and the department director has allocated $50,000 of this amount to the three services listed above. What is the fee schedule assuming that these overhead costs must be covered? (To answer this question, assume that the allocation of the $50,000 in overhead costs to each service is made on the basis of number of visits.) c. Assume that these services must make a combined profit of $25,000. Now what is the fee schedule? (To answer this question, assume that the profit requirement is allocated in the same way as overhead costs. Include the overhead costs from part b in developing the fee schedule.)

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Chapter1: Financial Statements And Business Decisions
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7.2. The audiology department at Randall Clinic offers many services to
the clinic's patients. The three most common, along with cost and
utilization data, are as follows:
Service
Basic examination
Advanced examination
Therapy session
Variable Cost Annual Direct Annual Number
of Visits
Fixed Costs
3,000
1,500
500
per Service
$5
7
10
$50,000
30,000
40,000
a. What is the fee schedule for these services, assuming that the
goal is to cover only variable and direct fixed costs?
b. Assume that the audiology department is allocated $100,000
in total overhead by the clinic, and the department director has
allocated $50,000 of this amount to the three services listed
above. What is the fee schedule assuming that these overhead
costs must be covered? (To answer this question, assume that
the allocation of the $50,000 in overhead costs to each service is
made on the basis of number of visits.)
c. Assume that these services must make a combined profit
of $25,000. Now what is the fee schedule? (To answer this
question, assume that the profit requirement is allocated in the
same way as overhead costs. Include the overhead costs from
part b in developing the fee schedule.)
Transcribed Image Text:7.2. The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Basic examination Advanced examination Therapy session Variable Cost Annual Direct Annual Number of Visits Fixed Costs 3,000 1,500 500 per Service $5 7 10 $50,000 30,000 40,000 a. What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs? b. Assume that the audiology department is allocated $100,000 in total overhead by the clinic, and the department director has allocated $50,000 of this amount to the three services listed above. What is the fee schedule assuming that these overhead costs must be covered? (To answer this question, assume that the allocation of the $50,000 in overhead costs to each service is made on the basis of number of visits.) c. Assume that these services must make a combined profit of $25,000. Now what is the fee schedule? (To answer this question, assume that the profit requirement is allocated in the same way as overhead costs. Include the overhead costs from part b in developing the fee schedule.)
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