30 Jan A When the tests are
Assignment # 3
End of Chapter Problems Page 150
5.2 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
3,000
Advanced Examination
7
30,000
1,500
Therapy Session
10
40,000
500
A What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed cost?
B What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed cost?
C Assume that the Audiology Department is allocated $100,00 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 cost 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.
D 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.
5.3 Allied Laboratories is combining some of its most common tests into one-price packages, One such package will contain three test that have the following variable costs:
Test A
Test B
Test C
Disposable Syringe
$3.00
$3.00
$3.00
Blood Vial
0.50
0.50
0.50
Forms
0.15
0.15
0.15
Reagents
0.80
0.60
1.20
Sterile Bandage
0.10
0.10
0.10
Breakage/Loses
0.05
0.05
0.05
A When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagents cost will remain the same (reagents are required for all three tests).
a. As a starting point, what is the price of the combined test assuming marginal cost pricing?
B Assume that Allied wants a contribution margin of $10 per test. What price must be set to achieve this goal?
C Allied estimates that 2,000 of the combined tests will be conducted during the first year. The annual allocation of direct fixed and overhead costs totals $40,000. What price must be set to cover full costs? What price must be set to produce a profit of $20,000 on the combined test?
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