Question

1. Dental Associates is currently operating at less than capacity. The company thinks it could cut costs by outsourcing dental cleaning to an independent dental hygienist for $50 per cleaning. Currently, a dental hygienist is employed for $30 an hour. A dental cleaning usually takes one hour to perform and consumes $10 of dental supplies, $8 of variable overhead, and $16 of fixed overhead. Should Dental Associates, Inc., continue to perform dental cleanings, or should it begin to outsource them? (1 point)

Answer 1

Total relevant costs in making are

Labor = $30

Supplies = $10

Variable overhead = $8

Total costs = $48.

If she outsourced it the cost is $50.

Since the cost to make is less when compared it to outsourcing it. Dental associates should not outsource the dental cleanings. Dental associates must continue to perform dental cleanings.