Question
Consider the following data for Midtown Clinic: Service Variable cost Annual direct fixed costs Annual number of visits Basic exam $3 $25,000 5,000 Advanced exam
Consider the following data for Midtown Clinic:
Service | Variable cost | Annual direct fixed costs | Annual number of visits |
Basic exam | $3 | $25,000 | 5,000 |
Advanced exam | $10 | $50,000 | 2,000 |
Therapy session | $20 | $10,000 | 500 |
Answer the following for Midtown:
a) What should the price be for a basic exam, assuming that the goal is to cover only variable and direct fixed costs?
b) What should be the price for an advanced exams, assuming that the goal is to cover only variable and direct fixed costs?
c) Now assume that Midtown must allocate $25,000 in overhead to the three services above. Assume that the allocation of overhead costs to each service is made on the basis of number of visits. Calculate the new price for therapy sessions.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started