After graduating from dental school two years ago, Dr. Lauren Farish purchased t

Question

After graduating from dental school two years ago, Dr. Lauren Farish purchased the dental practice of a long-time dentist who was retiring. In January of this year she had to replace the out-dated autoclave equipment she inherited from the previous dentist. Now as she is preparing her budget for next year, she is concerned about understanding how her cost for sterilizing her dental instruments has changed. She has gathered the following information from her records: Month Number of instruments used Total autoclave cost January 676 $7,448 February 576 6,504 March 776 7,142 April 976 9,016 May 876 7,620 June 1,076 8,554 July 1,276 10,042 August 1,176 9,870 What is the variable cost of sterilizing an instrument using the new equipment? What is the fixed cost of the autoclave equipment? What is the cost formula that Dr. Farish should use for estimating autoclave sterilization costs for next year’s budget? If Dr. Farish estimates she will use 1,192 instruments next month, what cost should she include in her budget for instrument sterilization?

Explanation / Answer

variable cost of steriliing an instrument is :

formula of variable cost: difference in cost/difference in unit

: (7142-6504)/776-576 = 3.19/ instrumnet

so the variable cost per instrumnet is : 3.19

now the fixed cost is : 7142 - 3.19*776 = $4666.56

formula of variable cost: difference in cost/difference in unit

Now, for 1192 instruments:

variable cost : 1192*3.19 = $3802.48

fixed cost : $4666.56

Total cost for next month will be estimataed at = 4666.56+3802.48 = $8469.04

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