A Local Accounting Firm Has Offered to Do All the Billings

question 9

Essay

A local accounting firm has offered to do all the billings and collections of a general practitioner.The annual fee will be $12,000.The service will replace the part-time bookkeeper who works for $12 an hour,10 hours a week.Because outsourcing accounting activities will take place away from the office,the doctor estimates that she will have one additional hour a week to see patients.Normally she sees four patients an hour with an average visit fee of $100.The office is open 50 weeks a year.Since the computer service will maintain all records in its office,the doctor will no longer need to rent storage space for the office files.The storage space rents for $150 a month.
Required:Determine whether or not the doctor should accept the offer to use the computer service.

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Definitions:

Labour Requirements

The amount and type of labor necessary to produce a certain quantity of goods or to provide services.

Zero-Base Budgeting

A budgeting approach where every expense must be justified for each new period, starting from a "zero base," with no reference to prior years' budget.

Redundant Activities

Processes or tasks that are unnecessary or duplicative, leading to inefficiency within an organization.

Continued Usefulness

Refers to the ongoing applicability or relevance of an asset, product, or process.