Nonprofit institution. The City of Little Rock, Arkansas, makes a $400,000 lump-sum budget appropriation to an agency to conduct a counseling program for drug addicts for a year. All of the appropriation is to be spent. The variable costs for drug prescriptions average

$400 per patient per year. Fixed costs are $150,000.

Required 1. Compute the number of patients that could be served in a year.

2. Suppose the total budget for the following year is reduced by 10%. Fixed costs are to remain the same. The same level of service to each patient will be maintained. Compute the number of patients that could be served in a year.

3. As in requirement 2, assume a budget reduction of 107c. Fixed costs are to remain the same.

The drug counselor has discretion as to how much in drug prescriptions to give to each patient. She does not want to reduce the number of patients served. On the average, what is the cost of drugs that can be given to each patient? Compute the percentage decline in the annual average cost of drugs per patient.