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Requirement 3. Dr. Young had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 200 to 250 hours. Suppose Dr. Young​, guided by the linear cost​ function, rejected this job because it would have brought a total increase in contribution margin of $9,000​, before deducting the predicted increase in total overhead​ cost, $10,000. What is the total contribution margin actually​ forgone?

Requirement 3. Dr. Young had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 200 to 250 hours. Suppose Dr. Young​, guided by the linear cost​ function, rejected this job because it would have brought a total increase in contribution margin of $9,000​, before deducting the predicted increase in total overhead​ cost, $10,000. What is the total contribution margin actually​ forgone?

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 18E
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Requirement 3. Dr.
Young
had a chance to do some school physicals that would have boosted physician contact hours billed to patients from
200
to
250
hours. Suppose Dr.
Young​,
guided by the linear cost​ function, rejected this job because it would have brought a total increase in contribution margin of
$9,000​,
before deducting the predicted increase in total overhead​ cost,
$10,000.
What is the total contribution margin actually​ forgone?
 
Determine the total contribution margin actually forgone by rejecting the special job that would have boosted professional​ labor-hours from
200
to
250
hours. The job would have brought a total increase in contribution margin of
$9,000​,
before deducting the predicted increase in total overhead​ cost,
$10,000.
 
Contribution before deducting incremental overhead
 
$9,000
 
Less:
Incremental overhead based on actual
 
6,000
 
Total contribution margin actually forgone
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