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1. You are considering starting a radiology practice. Your financial projections for the first year of operations are as follows: Number of visits 24,000 Wages and benefits $720,000 Medical supplies $270,000 Rent $144,000 Utilities $24,000 Administrative supplies $18,000 Assume that all costs are fixed except medical supplies and administrative supplies costs which are variable. a. What is the clinic underlying cost structure? b. What are the clinics expected total costs at 24,000 visits? c. What are the clinics estimated total cost at 30,000 visits? d. What are the clinics estimated total cost at 18,000 visits? e. What is the average cost per visit at 18,000 visits? f. What is the average cost per visit at 24,000 visits? g. What is the average cost per visit at 30,000 visits? h. How would you describe the relationship between volume (number of visits) and average cost per visit?

2. The Housekeeping Service Department of Orlando Radiology Clinic had $60,000 in direct costs during the year. These costs must be allocated to the clinics tree revenue-producing departments: Adult Radiology Services, Pediatric Radiology Services, and Other Radiology Services using the direct method. The radiology services revenue and hours of housekeeping services for each department are as follows: Department Revenues Housekeeping Hours Adult Radiology Services $1,200,000 300 Pediatric Radiology Services 600,000 600 Other Radiology Services 200,000 200 Total $2,000,000 1,100 a. What is the dollar allocation to each radiology services department if patient services revenue is used as the cost driver to allocate housekeeping costs to revenue-producing departments? Hint: complete the following table: Department Revenues Allocation Rate Allocation Adult Radiology Services $1,200,000 Pediatric Radiology Services 600,000 Other Radiology Services 200,000 Total $2,000,000 ------------------------- $ b. What is the dollar allocation to each radiology services department if hours of housekeeping support are used as the cost driver? Hint: complete the following table: Department Hours Allocation Rate Allocation Adult Radiology Services 300 Pediatric Radiology Services 600 Other Radiology Services 200 Total 1,100 ------------------------- $ c. Which of the two drivers is better? Please explain.