The Audiology Department at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost and utilization data, are as follows:ServiceVariable cost per serviceAnnual Direct fixed CostAnnual number of visitsBasic examination$5$50,00030,000Advanced examination730,0001,500Therapy section1040,000500What 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 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.

Variable cost means the cost which vary with the level of output where as fixed cost remain fixed…

Answered: he Audiology Department at Randall…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 5MAD

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The Audiology Department at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost and utilization data, are as follows:

Service	Variable cost per service	Annual Direct fixed Cost	Annual number of visits
Basic examination	$5	$50,000	30,000
Advanced examination	7	30,000	1,500
Therapy section	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 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.

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