Reference no: EM132751695

Pat Becker, M.D., is a chiropractor whose offices are in the Winter Garden Professional Building. In the past, Dr. Becker has operated her practice with a receptionist/secretary, and a part-time bookkeeper. Dr. Becker currently bills her patients and their insurance companies from her own office. The part-time bookkeeper, who works 20 hours per week, is employed exclusively for this purpose.

• Celebration Physician's Billings Center has offered to take over all of Dr. Becker's billings and collections for an annual fee of $27,000. If Dr. Becker accepts this offer, she will no longer need the bookkeeper. The bookkeeper's wages and fringe benefits amount to $22 per hour, and the bookkeeper works 50 weeks per year. With all the billings and collections done elsewhere, Dr. Becker will have three additional hours available per week to see patients. She sees an average of four patients per hour at an average fee of $32 per visit. Dr. Becker's practice is expanding, and new patients often must wait several weeks for an appointment. Finally, if Dr. Becker signs on with the center, she will no longer need to rent a records storage facility for $300 per month.

Required:

Problem 1: Conduct a relevant cost analysis to determine if it is profitable to outsource the bookkeeping. The net advantage (or disadvantage) of outsourcing the bookkeeping is $___________.