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Arial 12 = ab Wrap To [D Av Faste BIUL Merge & 3 B D E G Problem 9-8 Ambulatory Care Center at Hope University Hospital E Fixed Costs F Net Income GIVENS A B C D Price Per Variable Number Contribution Visit Costs of Visits Margin per Visit (A-B)XC $125 4,700 $360,000 $120 $60 $145,000 6,300 $145 $85 4,800 $75,000 $55 $85,000 $120,000 $140,000 $85,000 Based on the following formula: Price per visit x Visits - Fixed cost + Variable cost per visit x Visits Contribution Margin = Price per visit x Visits - Variable cost per visit x Vas ARXA83 Alternatives Givens: Don't Change Fees Change Fees Difference if Change Fees (Change - Don't Change Increase in volume Decrease in charge A Volume B Charge per test C Supplies expense D Supplies expense/test (CIA) E Avoidable fixed cost E1 Non-avoidable fixed cost 20,000 25% $30 -20% $7,000 $7,000 $0.35 5% $0 $0 $43,000 $43,000 Increase in per test expense No Change in AFC No Change in Non-AFC Solution: F Volume (A) G Revenues ( BF) H Variable costs (D x F) I Total contribution marg(G-H) J Avoidable fixed costs (E) K Product margin (1-J) 20,000 $600,000 $7,000 $593,000 $0 $593,000 Decision: As there is no change in the product margin, the organization is indifferent to making the change in volume. - A more thorough analysis would also look at the effects on all services over time