The Free Health Care Center (FH) charges each patient $5.50 (not quite free after all, but pretty close). Due to rising costs, the center has been forced to consider raising this charge to $6.00 or $6.50. If the price goes up, fewer people will come to the center for care. At a price of $6, only $18,000 patients are expected, and at a price of $6.50, there will likely be only 16,000 patient visits.
Prepare a flexible budget for the FH at prices of $5.50, $6.00 and $6.50. The variable cost per patient is $4, and the fixed costs of operating the center are $32,000. They currently expect to have about 20,000 patient visits.
What do you recommend the clinic do? Why?