Explore BrainMass
Share

Explore BrainMass

    Cost Accounting: Important information about Calculating Fee Schedules

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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:

    Variable Cost Annual Direct Annual Number
    Service per Service Fixed Costs 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 costs?
    b. 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.)
    c. 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.)

    © BrainMass Inc. brainmass.com October 10, 2019, 1:42 am ad1c9bdddf
    https://brainmass.com/business/financial-accounting-bookkeeping/cost-accounting-important-information-about-calculating-fee-schedules-345386

    Solution Preview

    Please refer attached file for better clarity of tables and formulas.

    Solution:
    a. What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs?

    Service Variable Cost per service Annual direct cost per service Annual number of visits Fee per service
    VC F Q VC+(F/Q)
    Basic Examination 5 50000 3000 21.67
    Advanced Examination 7 30000 ...

    Solution Summary

    Solution describes the steps to calculate fee schedules/fee per service levels for each requirement. Please refer to the attached Excel file in the solution for fully formatted answers with formulas and tables.

    $2.19