Assume that a radiology practice has the following cost structure: Fixed Costs = $400,000 Variable cost...
Assume that a radiology practice has the following cost structure:
Fixed Costs = $400,000 Variable cost per procedure = $30
Furthermore, assume that the group expects to perform 7,000 procedures in the coming year.
- What is the group’s underlying cost structure?
- What is the group’s expected total variable costs?
- What is the group’s expected total costs?
- What is the group’s average cost per procedure?
Homework Answers
What is the group’s underlying cost structure?
The underlying cos structure is a combination of fixed and variable cost.
What is the group’s expected total variable costs?
Total variable cost = Variable cost per procedure x Number of procedure = 30 x 7,000 = $ 210,000
What is the group’s expected total costs?
Total costs = Variable cost + fixed cost = 210,000 + 400,000 = $ 610,000
What is the group’s average cost per procedure?
Average cost = total cost / number of procedure = 610,000 / 7,000 = $ 87.14
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