1. Pet Energy Therapy Association (PETA) treats peoples pets, and has the following cost structure:

Charge per therapy session $100

Variable cost per therapy session $ 20

Fixed costs $100,000

They expect to perform 2,000 two hour session each year (8/day, 5 days/week, 50 weeks/year).

A. Construct PETAs profit and loss statement. Profit/Loss $

B. How many sessions must PETAs perform to breakeven?

C. To earn a profit of $80,000, how many sessions must they provide this year?

D. If there is one fulltime employee, fully booked, who spends one hour on each session (8 sessions per day, 40 per week, 2,000/year), what would we need to assume about the additional sessions needed to earn $100,000?

2.

St. Payne Med Center is using the step-down method to allocate costs. They have two support departments (Record Keeping and Cleaning), and two patient service departments (Eye Care and Dental Care). Some of the Record Keeping costs are allocated to Cleaning before the support department costs are allocated to patient service departments. Record Keeping costs are allocated based on the number of employees, while Cleaning costs are allocated by the number or rooms. The following data has been collected:

Support Departments Patient Revenue Departments

Record Keeping Cleaning Eye Care Dental Care

Department Costs $ 13,000 $10,000 $32,000 $60,000

Number of Employees 2 4 3 6

Number of Rooms 1 1 2 3

a. What amount of the Record Keeping is allocated to Cleaning?

b. What amount of the Record Keeping is allocated to Eye Care? $

c. What amount of the Record Keeping is allocated to Dental Care? $

d. What amount of the Cleaning is allocated to Eye Care? $

e. What amount of the Cleaning is allocated to Dental Care? $

f. After Allocation, What are Eye Cares total costs? $

g. After Allocation, What are Dental Cares total costs?