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? A. $ 70 B. $ 80 C. $ 90 D. $100 E. $110

Answer 1

C. $ 90

Step-by-step explanation:

Number of visits = 1,000

Variable cost = $10 × 1,000 = $10,000

Fixed cost = $50,000

Overhead cost = $20,000

Required profit = $10,000

So,Total Cost = Variable Cost+ Fixed Cost+ Overhead Cost

= $10,000 + $50,000 + $20,000

= $80,000

Now, Price per Visit = (Total Cost+ Required Profit) ÷ Number of visits

= ($80,000 + $10,000) ÷ 1,000

= $90,000 ÷ 1,000

= $90