4.2 You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:

Number of visits 10,000. Utilities $2,500

Wages and benefits $220,000. Medical supplies $50,000

Rent $5,000 Administrative supplies $10,000

Depreciation $30,000

Assume that all costs are fixed except supplies costs, which are variable.

a. What is the clinic's underlying cost structure?

b. What are the clinic's expected total costs?

c. What are the clinic's estimated total costs at 7,500 visits? At 12,500 visits?

d. What is the average cost per visit at 7,500, 10,000, and 12,500 visits?

4.6 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for General Administration and Financial Services is patient services revenue, while the cost driver for Facilities is space utilization

a. What are the appropriate allocation rates?

b. Allocate the hospital's overhead costs to the patient services departments

4.7 Assume that the hospital uses salary dollars as the cost driver for General Administration, housekeeping labor hours as the cost driver for Facilities, and patient services revenue as the cost driver for Financial Services. (The majority of the costs of the Facilities Department are devoted to housekeeping services.)

a. What are the appropriate allocation rates?

b. Allocate the hospital's overhead costs to the patient services departments.

c. Compare the dollar allocations with those obtained in Problem 4.6. Explain the differences. d. Which of the two cost driver schemes is better? Explain your answer.