Spohn Clinic uses client-visits as its measure of activity. During February, the

Question

Spohn Clinic uses client-visits as its measure of activity. During February, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,370 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for February:

The administrative expenses in the planning budget for February would be closest to:

$5,648

$5,466

$5,660

$5,418

Fixed Element per Month Variable element per client-visit Revenue - $ 28.10 Personnel expenses $ 26,100 $ 7.70 Medical supplies 900 5.10 Occupancy expenses 5,600 0.80 Administrative expenses 4,300 0.40 Total expenses $ 36,900 $ 14.00

Explanation / Answer

The administrative expenses in the planning budget for February would be closest to = Fixed + Variable Expense

= $ 4,300 + ( 0.40 * budgeted client-visits)

= $ 4,300 + (0.40 * 3,400)

= $ 5,660

hence the correct answer is $ 5,660

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