1. What is the estimate of the marginal cost of the Phase 4 hospital services? (Assume, as given in the case, that 60 percent of the designated costs are fixed and the remaining costs are variable.) 2. Create the underlying cost structure (cost behavior) equation. What is the relevant range for this structure? Does the structure change if the contract is expected to bring more than 30 additional transplant patients? 3. What fixed-cost proportion is required to force the average variable cost for Phase 4 hospital services to be $90,000? 4. Assume that the fixed-cost proportion is only 50 percent. What price must be set to cover variable costs? What if the fixed-cost proportion is 70 percent? 5. Return to the original assumption (60/40) regarding fixed-cost percentages. How do contract costs change if additional fixed costs are required when contract volume exceeds 30? Assume first that fixed costs increase by 15 percent, then assume 20 percent, and finally 25 percent. When answering this question, assume contract volumes of 31 and 60.

LOS Mrsing Ohne Coo's Co Cox Cost Cost Costs $10 361 513,712 130306 11 168 1601 T401 14,50 20 PM 42 12 74159 303681 115:349 1,142 7438 18 468 9,609 11,818 138,860 13 001 1,312 20 127 130.308 11 062 8.50 7409 24,509 20,094 33450 5.280 4.779 166.124 8. 765 10 061 22 007 20.1-40 15 821 30 202 9 122 11,320 EXHIBIT 4.1 Hospital Courts Carter. Phone 4 in Millions of Dolars] Canbridge TransplantAge LOS Total Nursing Ancillary OR Lab Radiology Patient (years) (days) Drug Other Costs Cost Cost Cost Cost Cost Cost Costs A 61 25 $141,092 $10,261 $65,416 $6,770 $13,712 $1,483 $20,992 $22,458 B 56 15 139,306 11,969 63,668 8,501 7,409 2,261 24,504 20,994 42 12 74,259 6,939 33,661 3,128 5,279 668 6,964 17.620 52 13 115,349 7,221 54,063 5,779 6,112 903 7,638 33,633 12 26 172,613 28,205 72,204 6,847 10,550 1,766 23,061 29,980 59 22 83,807 16,858 33,474 4,654 6,211 1,397 9,698 11,515 L -IOTMOO 41 25 136,060 9,645 63,208 6,489 13,091 1,382 20,127 22, 118 35 17 139,308 11,969 63,669 8,501 7,409 2,261 24,505 20,994 52 12 74,259 6,939 33,660 3, 128 5,280 668 6,964 17,620 38 13 115,348 7,221 54,063 5,778 6, 111 903 7,639 33,633 K 59 25 166,224 26,909 69,657 6,765 10,061 1,677 22,007 29, 148 60 21 80,034 15,629 32,202 4,531 5,937 1,293 9,122 11,320 Mean 47 19 $119,805 $13,314 $53,245 $5,906 $8,097 $1,389 $15,268 $22,586 LOS: length of stay; OR: operating roomAge LOS Total Nursing Ancillary OR Lab Radiology Patient (years) (days) Drug Other Costs Cost Cost Cost Cost Cost Cost Costs A 61 25 $141,092 $10,261 $65,416 $6,770 $13,712 $1,483 $20,992 $22,458 56 15 139,306 11,969 63,668 8,501 7,409 2,261 24,504 20,994 42 12 74,259 6,939 33,661 3,128 5,279 668 6,964 17,620 52 13 115,349 7,221 54,063 5,779 6, 112 903 7,638 33,633 12 26 172,613 28,205 72,204 6.847 10,550 1,766 23,061 29,980 59 22 -IOTMOOD 83,807 16,858 33,474 4,654 6,211 1,397 9,698 11,515 41 25 136,060 9,645 63,208 6,489 13,091 1,382 20,127 22, 118 35 17 139,308 11,969 63,669 8,501 7,409 2,261 24,505 20,994 52 12 74,259 6,939 33,660 3,128 5,280 668 6,964 17,620 38 13 115,348 7,221 54,063 5,778 6, 111 903 7,639 33,633 K 59 25 166,224 26,909 69,657 6,765 10,061 1,677 22,007 29, 148 60 21 80,034 15,629 32,202 4,531 5,937 1,293 9,122 11,320 Cambridge Trans Mean 47 19 $119,805 $13,314 $53,245 $5,906 $8,097 $1,389 $15,268 $22,586