COSTS AND REVENUES FOR URGENT CARE CENTER

COSTS: Urgent Care Center

All costs and revenues are per year

Labor Cost

o3 Primary Care Physicians Salary$150,000 $450,000

o5 RN/BSN Salary Salary $65,000 $325,000

oPayroll Taxes (all employees) $200,000

oBenefits (all employees) $1,162,500

Other Variable Costs

oSupplies & Misc. Overhead$102,400

oAdvertising$35,000

TOTAL VARIABLE COST$2,274,900

Capital Cost

oAnnualized Building Cost$292,487

oAnnualized Equipment Cost$58,497

Other Fixed Costs

oInsurance$214,491

oLegal$146,244

oAdministrative$263,238

oAdministrative Fee to Franchise$120,000

TOTAL FIXED COST$ 1,094,957

REVENUES: Urgent Care Center

Each for the three (3) primary care physicians can see 3500 patients in a year, at an average annual fee per patient of $350.

Question 1: Feasible Range for the Urgent Care Center

In order to justify our scale of operation we must be able to attract enough patients to be inside the feasible range of production. The feasible range is governed by the way productivity changes as more staff must share the fixed resources. Unfortunately it is rare for detailed information about productivity to be available to decision-makers. However because of the one-to-one correspondence between productivity and cost, we can see the boundaries of the feasible range reflected in our variable costs, and these costs are always available to decision makers on a detailed and up-to-date basis.

Step 1: Find Average Variable Cost by dividing the Total Variable Cost by the total number of patients served by all three physicians, given under Revenues.

Step 2: The fee per patient is also given under Revenues. Does the fee per patient cover the Average Variable Cost?

Question 2: Breaking Even for the Urgent Care Center

In the short run it is enough to establish that your scale of operation is justified, but in the long run we have to cover our capital costs as well as our labor and other variable costs.

Step 1: Find the Total Cost by summing the Total Variable Cost and Total Fixed Cost.

Step 2: Find the Average Total Cost by dividing Total Cost by the total number of patients served by all three physicians.

Step 3: Does the fee per patient cover the Average Total Cost?

Question 1: Feasibility of Urgent Care Center

Step 1: Find Average Variable Cost

Step 2: Does the fee per patient cover Average Variable Cost?

If Yes, the facility is operating in its feasible range. If No, the facility should reduce its scale of operation.

Question 2: Breakeven for the Urgent Care Center

Step 1: Find Total Cost

Step 2: Find Average Total Cost

Step 3: Does the fee per patient cover Average Total Cost?

If Yes, the facility is breaking even. If No, the facility is operating at a loss.