70.2K

Verified Solution

Link Copied!

Priya Rahavy, M$.$D$.,$ is a general practitioner whose offices are located in the Lake Forest Professional Building. In the past, Dr$.$ Rahavy has operated her practice with a nurse, a receptionist$/$secretary$,$ and a part$-$time bookkeeper. Dr$.$ Rahavy, like many small$-$town physicians, has billed her patients and their insurance companies from her own office. The part$-$time bookkeeper, who works $15$ hours per week, is employed exclusively for this purpose.

North Avenue Physician's Service Center has offered to take over all of Dr$.$ Rahavy's billings and collections for an annual fee of $$24,000.$ If Dr$.$ Rahavy accepts this offer, she will no longer need the bookkeeper. The bookkeeper's wages and fringe benefits amount to $$20$ per hour, and the bookkeeper works $50$ weeks per year. With all the billings and collections done elsewhere, Dr$.$ Rahavy will have three additional hours available per week to see patients. She sees an average of four patients per hour at an average fee of $$30$ per visit. Dr$.$ Rahavy's practice is expanding, and new patients often have to wait several weeks for an appointment. She has resisted expanding her office hours or working more than $50$ weeks per year. Finally, if Dr$.$ Rahavy signs on with the center, she will no longer need to rent a records storage facility for $$200$ per month.

Conduct a relevant cost analysis to determine if it is profitable to outsource the bookkeeping.

Calculate the net advantage $($disadvantage$)$ of outsourcing the bookkeeping.

Use a negative sign with your answer to indicate a net disadvantage, if applicable.

$Answer

Answer & Explanation Solved by verified expert

See Answer