Kilson Dental Centre currently charges $20 per dental exam. A new company that recently located near the dental centre asked if the dental centre would be interested in providing dental services to their employees at a special rate of $15 per dental exam.
The dentists have agreed to offer the dental exams at the reduced fee if the $15 would cover the variable costs of the dental exam.
The dental centre's accountant provided the following information about dental exams during the first six months of the year: a. Using the least squares method, determine the variable cost per dental exam.
b. Will the $15 reduced fee cover the dental centre's variable cost of providing the dental exam?
c. Develop a cost function that can be used to estimate total exam costs at different activity levels.
d. If a total of 200 exams are expected to be performed in July, what would be the total expected cost of performing the 200 exams?
e. If 50 additional exams are performed each month at the special rate, what would be the incremental revenue resulting from the 50 exams?
f. What would be the incremental cost of providing the 50 exams?
g. What would be the incremental profit that would result from providing the 50 exams at the reduced rate?

Question

Kilson Dental Centre currently charges $20 per dental exam. A new company that recently located near the dental centre asked if the dental centre would be interested in providing dental services to their employees at a special rate of $15 per dental exam.
The dentists have agreed to offer the dental exams at the reduced fee if the $15 would cover the variable costs of the dental exam.
The dental centre's accountant provided the following information about dental exams during the first six months of the year:  a. Using the least squares method, determine the variable cost per dental exam.
b. Will the $15 reduced fee cover the dental centre's variable cost of providing the dental exam?
c. Develop a cost function that can be used to estimate total exam costs at different activity levels.
d. If a total of 200 exams are expected to be performed in July, what would be the total expected cost of performing the 200 exams?
e. If 50 additional exams are performed each month at the special rate, what would be the incremental revenue resulting from the 50 exams?
f. What would be the incremental cost of providing the 50 exams?
g. What would be the incremental profit that would result from providing the 50 exams at the reduced rate?

Quizplus · Accepted Answer

The Answer of Kilson Dental Centre currently charges $20 per dental exam. A new company that recently located near the dental centre asked if the dental centre would be interested in providing dental services to their employees at a special rate of $15 per dental exam.
The dentists have agreed to offer the dental exams at the reduced fee if the $15 would cover the variable costs of the dental exam.
The dental centre's accountant provided the following information about dental exams during the first six months of the year:  a. Using the least squares method, determine the variable cost per dental exam.
b. Will the $15 reduced fee cover the dental centre's variable cost of providing the dental exam?
c. Develop a cost function that can be used to estimate total exam costs at different activity levels.
d. If a total of 200 exams are expected to be performed in July, what would be the total expected cost of performing the 200 exams?
e. If 50 additional exams are performed each month at the special rate, what would be the incremental revenue resulting from the 50 exams?
f. What would be the incremental cost of providing the 50 exams?
g. What would be the incremental profit that would result from providing the 50 exams at the reduced rate?

Kilson Dental Centre Currently Charges $20 Per Dental Exam