7.2

The audiology department at Randall Clinic offers many services to the clinics patients. The three most common, along with cost and utilization data, are as follows:

Variable Cost Annual Direct Annual Number

Service per service Fixed Cost of visits

Basic examination $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 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 overhead costs to each service is made on the basis of the number of visits.)

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.)