Fast Care is a health care franchise that functions as a primary family health clinic, seeing unscheduled patients 24 hours per day. A corporate office management engineering study has shown that the clinic was experiencing some dips in volume in the mid-afternoon hours. To increase volume, efficiney, and revenues, the clinic administrator contracted with the area high schools to provide after-school physicals for the sports teams. The initial agreement was that Fast Care would charge the market average which is $150 per visit. Fixed costs were $50,000 and variable costs were $55 per physical. Although this strategy proved somewhat successful, gross profit margin lagged behind the corporate expectations. To improve its margin, the clinic is considering increasing the visit price to $175. Fast Care projects that this price increase will cause the high schools to send their athletes to other providers which could cause a 33% decrease in volume. Last year, Fast Care performed 1,500 visits. If the program closes down entirely, all $50,000 in fixed costs would be saved.

a. Assuming that this price increase would decrease the number of patients by 33%, what should Fast Care do.

b What price would Fast Care have to charge to make up for the loss of patients

c. What if only 40% of the fixed costs are avoidable? What decision should Fast Care make in that case.