Question

Super Clinics offers one service that has the following annual cost and utilization estimates: Variable cost per visit $10; Annual direct fixed costs $50,000; Allocation of overhead costs $20,000; Expected utilization 1,000 visits. What price per visit must be set if the clinic wants to make an annual profit of $10,000 on the service?

Answer 1

Price to be charged per visit = $90 per visit

Step-by-step explanation:

We need to calculate the price per visit.

Desired profit = $10,000

Total costs for 1,000 visits = Variable Costs + Fixed Costs + Allocated Costs

Variable cost = $10 X 1,000 visits = $10,000

Fixed costs = $50,000

Allocated Overhead costs = $20,000

Total costs = $10,000 + $50,000 + $20,000 = $80,000

Total amount to be recovered = Total costs + desired profit

= $80,000 + $10,000 = $90,000

Total no of visits = 1,000

Price to be charged per visit = $90,000/1,000 = $90 per visit