Chimilio Clinic Uses Client-Visits as Its Measure of Activity

question 263

Multiple Choice

Chimilio Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,360 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for June: Data used in budgeting:
Actual results for January:
The net operating income in the flexible budget for June would be closest to:

• A) $8,957
• B) $11,152
• C) $11,780
• D) $8,748

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Definitions:

Income Range

The spectrum of income levels, from the lowest to the highest, that exists within a given population or among a specific group of individuals.

Substitution Effect

The economic principle that as the price of a good increases, consumers will replace it with cheaper alternatives.

Income Effect

The variation in income for a person or an economy and its impact on the demand for a specific good or service.

Perfect Substitutes

Goods that can serve the same purpose perfectly, where consumers are indifferent between them and will select based on price.