Cost Behavior, High-low Method, Pricing Decision
Not what you're looking for?
Since the clinic is brand new, it has no experience to go on. Carlos decided to operate the clinic for two months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of $25, half the amount charged by Fonseca, Ruiz, and Dunn for professional services.
The accounting services clinic opened on January 1. During January, the clinic had 120 hours of professional service. During February, the activity was 150 hours. Costs for these two levels of activity usage are as follows
120 Professional Hours 150 Professional Hours
Salaries:
Senior accountant $2500 $2500
Office assistant $1200 $1200
Internet and software subs. $700 $850
Consulting by Senior Partner $1200 $1500
Depreciation (equipment) $2400 $2400
Supplies $905 $1100
Administration $500 $500
Rent (office) $2000 $2000
Utilities $332 $365
2. Use the high-low method to separate the mixed costs into their fixed and variable components. (Note: Round variable rates to two decimal places and fixed amounts to the nearest dollar.)
Components
Mixed Cost Variable Rate Fixed Amount
Internet and software subscriptions $ $
Supplies $ $
Utilities $ $
3. Luz Mondragon, the chief paraprofessional of the clinic, has estimated that the clinic will average 140 professional hours per month. If the clinic is to be operated as a nonprofit organization, how much will it need to charge per professional hour? Round answer to two decimal places.
$ per professional hour
How much of this charge is variable? Round answer to two decimal places.
$ per professional hour
How much is fixed? Round answer to two decimal places.
$ per professional hour
4. Conceptual Connection: Suppose the accounting center averages 170 professional hours per month. How much would need to be charged per hour for the center to cover its costs? Round answer to two decimal places.
$ per professional hour.
Purchase this Solution
Solution Summary
Your tutorial is attached showing how to find the variable and fixed portion using high low method. Then breakeven analysis is used to solve for hourly price to achieve nonprofit (zero profits).
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.