Question

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

Answer 1

Answer:

$70 per visit if the clinic wants to make an annual profit of $10,000 on the full cost of the service.

Explanation:

Cost to be recovered = Profit + Fixed cost + Variable cost

                                    = $10000 + $50000 + 10*$1000

                                    =$70000

Expected volume = 1000 Visit

Price Per visit = $70000 / 1000

                      = $70 per visit