Estimating opportunity cost
Course:- Managerial Accounting
Reference No.:- EM1348455

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Rnee Behr, MD is a psychiatrist who is in heavy demand. Even though she has raised her fees considerably during the past 5 years, Dr. Behr cannot accommodate all the patients who wish to see her. Behr has conductd 6 hours of appointments per day, 6 days per week, for 48 weeks per year. Her fee averages $150 per hour.

Her variable costs are negligible and may be ignored for decision purposes. Ignore income taxes.

1) Behr is weary of working 6-day weeks. She is considering taking every other Saturday off. What would be her annual income a) if she worked every Saturday and b) if she worked every other Saturday?

2) What would be her opportunity cost for the year of not working every other Saturday?

3) Assume that Dr. Behr has definitely decided to take every other Saturday off. She loves to repair her sports car by doing the work herself. If she works on her car during half a Saturday when she otherwise would nott see patients, what is her opportunity cost?

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