Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Make or Buy Rashad Rahavy, M . D . , is a general practitioner whose offices are located in the South Falls Professional Building. In

Make or Buy
Rashad Rahavy, M.D., is a general practitioner whose offices are located in the South Falls Professional Building. In the past, Dr. Rahavy has operated his practice with a nurse, a receptionist/secretary, and a part-time bookkeeper. Dr. Rahavy, like many small-town physicians, has billed his patients and their insurance companies from his own office. The part-time bookkeeper, who works 10 hours per week, is employed exclusively for this purpose.
North Falls Physician's Service Center has offered to take over all of Dr. Rahavy's billings and collections for an annual fee of $7,000. If Dr. Rahavy accepts this offer, he will no longer need the bookkeeper. The bookkeeper's wages and fringe benefits amount to $13 per hour, and the bookkeeper works 50 weeks per year. With all the billings and collections done elsewhere, Dr. Rahavy will have two additional hours available per week to see patients. He sees an average of four patients per hour at an average fee of $35 per visit. Dr. Rahavy's practice is expanding, and new patients often have to wait several weeks for an appointment. He has resisted expanding his office hours or working more than 50 weeks per year. Finally, if Dr. Rahavy signs on with the center, he will no longer need to rent a records storage facility for $100 per month.
Conduct a relevant cost analysis to determine if it is profitable to outsource the bookkeeping.
Calculate the net advantage (disadvantage) of outsourcing the bookkeeping.
Use a negative sign with your answer to indicate a net disadvantage, if applicable.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Debra C. Jeter, Paul Chaney

2nd Edition

0471218529, 978-0471218524

More Books

Students also viewed these Accounting questions