Rashad Rahavy, M.D., is a general practitioner whose offices are located in the
ID: 2482819 • Letter: R
Question
Rashad Rahavy, M.D., is a general practitioner whose offices are located in the South Falls Professional Building. In the past, Dr. Rahavy has operated his practice with a nurse, a receptionist/secretary, and a part-time bookkeeper. Dr. Rahavy, like many small-town physicians, has billed his patients and their insurance companies from his own office. The part-time bookkeeper, who works 10 hours per week, is employed exclusively for this purpose.
North Falls Physician's Service Center has offered to take over all of Dr. Rahavy's billings and collections for an annual fee of $9,000. If Dr. Rahavy accepts this offer, he will no longer need the bookkeeper. The bookkeeper's wages and fringe benefits amount to $12 per hour, and the bookkeeper works 50 weeks per year. With all the billings and collections done elsewhere, Dr. Rahavy will have two additional hours available per week to see patients. He sees an average of three patients per hour at an average fee of $20 per visit. Dr. Rahavy's practice is expanding, and new patients often have to wait several weeks for an appointment. He has resisted expanding his office hours or working more than 50 weeks per year. Finally, if Dr. Rahavy signs on with the center, he will no longer need to rent a records storage facility for $100 per month.
(a) Calculate the net benefit (cost) of outsourcing the bookkeeping.
Explanation / Answer
Costs savings of recored facility* => $100 * 12months => $1200
Conclusion => Its better for Dr. Rahavy to choose Part-Time bookkeeper as he gets a cost benefit of $1800 by opting for outsourcing.
Particulars Cost of Outsourcing Part time Bookkeeper Annual Fee 9000 Wages of Book keeper 6000 Costs savings of recored facility* 1200 0 Net Cost ($) 7800 6000 Difference in Net SavingsRelated Questions
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