Activity Based Costing: Eye Shop is a small optometry practice run by a Doctor Shrewd. The optometrist employs one receptionist and one assistant. The receptionist schedules appointments, checks patients in, and handles the billing. The average time per patient for scheduling of an appointment is two minutes. and the average time per check-in and seating is also two minutes. Average time spent per billing is five minutes. The receptionist is paid $10 an hour.

The assistant conducts the preliminary eye test, shows styles of frames available. and fits frames to the customer. The average time for preliminary tests is 15 minutes; the average time for showing and fitting frames is 20 minutes. The assistant is paid $20 per hour.

Dr. Shrewd takes care of all fittings of new prescriptions for both regular lenses and contacts. As part of the normal checkup, he conducts a glaucoma test and a test to ensure that the current prescription is correct and interviews each patient to discuss any specific problems the patient may be experiencing. Fitting for a new prescription for glasses averages 30 minutes. Fitting for contacts requires one hour on the initial visit plus two follow-up visits, each lasting 30 minutes. Glaucoma tests take 5 minutes. The test to ensure that the current prescription is correct averages 15 minutes, and the individual interview on specific problems averages 10 minutes. Dr. Shrewd costs his time at $50 per hour.

Average costs for materials are as follows: frames—$15; lenses—$25; contact lenses including start-up kit —$20.

Required:

a. Identify the activities that cause costs and assign costs to each activity.

b. How much would it cost to conduct a normal checkup?

c. How much does it cost to conduct a preliminary examination and prescribe and fit regular glasses? Contacts?