$1.$ You are considering starting a radiology practice. Your financial projections for the first year of operations are as follows:

Number of visits $24,000$ visits

Fixed Variable

Wages and benefits $$1,200,000$ $$0$

Medical supplies $$0$ $$300,000$

Rent $$200,000$ $$0$

Utilities $$36,000$ $$0$

Administrative supplies $$0$ $$30,000$

$1,436,000330,000$

a$.$ What is the clinic underlying cost structure? See textbook, pages $102-108.$

What are the clini$$s estimated total cost at $24,000$ visits?

d$.$ What are the clinic$$s estimated total cost at $30,000$ visits?

e$.$ What is the average cost per visit at $20,000$ visits?

f$.$ What is the average cost per visit at $24,000$ visits?

g$.$ What is the average cost per visit at $30,000$ visits?

h$.$ How would you describe the relationship between volume $($number of visits$)$ and average cost per visit?

$2.$ The Housekeeping Services Department of AdventHealth Clinic had $$120,000$ in direct cost during the year. These costs must be allocated to AdventHealth Clinic$$s three revenue$-$producing patient services departments: $(1)$ Pediatric Services, $(2)$ Adult Services, and $(3)$ Geriatric Services using the direct method. The cost driver under consideration is hours of housekeeping services. The hours of housekeeping services for each department are as follows:

Department Housekeeping Hours

Pediatric Services $2,400$

Adult Services $3,600$

Geriatric Services $6,000$

Total Housekeeping hours $12,000$

a$.$ What is the dollar allocation to each department if hours of housekeeping support are used as the cost driver? Please show your work. Hint: complete the following tables:

Department Allocation Rate Amount Allocated

Pediatric Services $ $

Adult Services $ $

Geriatric Services $ $

Total Amount Allocated $

b$.$ What is the goal of cost allocation?

c$.$ What characteristics make an effective cost driver?

$3.$ Describe the following methods used to estimate the cost of individual services:

a$.$ Cost$-$to$-$charge ratio $($CCR$)$ method

b$.$ Relative value unit $($RVU$)$ method

c$.$ Activity$-$based costing $($ABC$)$ method