# The audiology department at Ra

The audiology department at Randall Clinic offers many servicesto the clinic’s patients. The three most common, along with costand utilization data, are as follows: Service Variable Cost perService Annual Direct Fixed Costs Annual Number of Visits Basicexamination \$5.2 \$45158 3192 Advanced examination 7.9 30071 1585Therapy session 9.6 44792 546 Assume that the audiology departmentis allocated \$100000 in total overhead by the clinic, and thedepartment director has allocated \$47017 of this amount to thethree services listed above. What is the fee schedule for the basicexamination service, assuming that the goal is to cover variableand direct fixed costs as well as overhead costs? (To answer thisquestion, assume that the allocation of overhead costs to eachservice is made on the basis of number of visits.)

Randall Clinic

Determination of fee schedule forthe basic examination service:

The fee schedule for the basicexamination service = \$28.18 per visit

Estimated fee for 3,192 visits =3,192 x \$28.18 = \$89,951

Allocation of audiology departmentservice cost to three services:

Total allocated cost = \$47,017

Allocation base – number of patientvisits

Total number of patent visits forall three services = 3,192 + 1,585 + 546 = 5,323

Overhead allocation rate =\$47,017/5,323 = \$8.833

 Service Variable Cost per Service Annual Direct Fixed Costs Annual number of visits fixed direct cost per visit Basic examination \$5.20 \$45,158 3,192 \$14.15 Advanced examination \$7.90 \$30,071 1,585 \$18.97 Therapy Session \$9.60 \$44,792 546 \$82.04

 Variable cost Direct fixed cost per visit overhead cost per visit Total cost per visit Basic examination \$5.20 \$14.15 \$8.83 \$28.18 Advanced examination \$7.90 \$18.97 \$8.83 \$35.70 Therapy Session \$9.60 \$82.04 \$8.33 \$99.97

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