The Fairman Care Center charges each patient $5. The center expects to have about 20,000 patient visits at the current $5 price. However, due to rising costs, the center has been forced to consider raising the charge to $6 or $7. If the prices go up, fewer people will come to the center for care. At the price of $6, only 18,000 patients are expected, and at the price of $7, there will be approximately 16,000 patients visiting the clinic.
Prepare a flexible budget for the Fairman Center at rates of $5, $6, and $7. The variable cost per patient is $4 and the fixed costs of operating the center are $32,000. What action do you recommend for the center? Why?