The Moya Clinic specializes in the provision of drug recovery services to clients. The service is...
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The Moya Clinic specializes in the provision of drug recovery services to clients. The service is provided on a residential basis and clients stay for whatever number of days suit their needs. Budgeted estimates for the year ending 30 March 2022 are as follows: The maximum capacity of the clinic is 30 clients per day for 360 days in the year. Clients are invoiced at a fee per day. The budgeted occupancy levels will vary with the client fee level per day and is estimated at different percentages of maximum capacity as follows: (b) O Client fee Occupancy level per day $50 $70 $95 High Most likely Low Occupancy as a percentage of maximum capacity 90% 70% 50% Variable costs are also estimated at one of three levels per client day. The high, most likely and low levels per client day are $20, $25, and $30, respectively. The range of cost levels reflect only the possible effect of the prices of goods and services, Required: (a) Prepare a payoff table showing the budgeted contribution earned by The Moya Clinic for the year ended 31st March 2022 for each of the nine possible outcomes. (7 marks) (b) State the client fee strategy for the year to 31st March 2022...which will result from the use of each of the following decision rules: () Maximax (ii) Maximin (iii) Minimax regret Your answer must explain the basis of each rule and the nature of the decision maker that would apply such rules. (12 marks) (c) The probabilities of variable cost levels occurring at the high, most likely, and low levels provided in the question are estimated as 0.3, 0.4 and 0.3 respectively. Using the information available, determine the client fee strategy which will be chosen and the basis on which this decision is made. (6 marks) The Moya Clinic specializes in the provision of drug recovery services to clients. The service is provided on a residential basis and clients stay for whatever number of days suit their needs. Budgeted estimates for the year ending 30 March 2022 are as follows: The maximum capacity of the clinic is 30 clients per day for 360 days in the year. Clients are invoiced at a fee per day. The budgeted occupancy levels will vary with the client fee level per day and is estimated at different percentages of maximum capacity as follows: (b) O Client fee Occupancy level per day $50 $70 $95 High Most likely Low Occupancy as a percentage of maximum capacity 90% 70% 50% Variable costs are also estimated at one of three levels per client day. The high, most likely and low levels per client day are $20, $25, and $30, respectively. The range of cost levels reflect only the possible effect of the prices of goods and services, Required: (a) Prepare a payoff table showing the budgeted contribution earned by The Moya Clinic for the year ended 31st March 2022 for each of the nine possible outcomes. (7 marks) (b) State the client fee strategy for the year to 31st March 2022...which will result from the use of each of the following decision rules: () Maximax (ii) Maximin (iii) Minimax regret Your answer must explain the basis of each rule and the nature of the decision maker that would apply such rules. (12 marks) (c) The probabilities of variable cost levels occurring at the high, most likely, and low levels provided in the question are estimated as 0.3, 0.4 and 0.3 respectively. Using the information available, determine the client fee strategy which will be chosen and the basis on which this decision is made. (6 marks)
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
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