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.

Analyze the profitability of disposing of or keeping equipment considering various costs and revenues.

Evaluate special pricing offers and their impact on differential profit and loss.

Identify costs associated with making or buying decisions and calculate their impact on profitability.

Recognize the importance of contribution margin in making decisions about product discontinuation or continuation.

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Definitions:

Work Motivation

The psychological forces that determine the direction of a person's behavior in an organization, their level of effort, and their level of persistence.

Enthusiastically

Doing something with eagerness and a high level of energy or excitement.

Alderfer's ERG Theory

A theory that categorizes human needs into three categories: Existence, Relatedness, and Growth, suggesting that people are motivated to fulfill these needs.

Lower-level Need

Basic requirements for human survival and security, typically including physiological and safety needs.