For the following problems, assume the following for our clinic:

Our current, "base" volume is currently at 7500 visits and our average revenue per unit is $80.00. Our variable cost per unit is $42.00. A managed care company claims it will bring you 2500 more visits if you would contract with it, at a rate of $60.00 per visit. Your current capacity is around 20,000 visits.

1.Should you accept their offer?

2.Before accepting their offer, what is your profit or loss?

3.What is the contribution margin for the incremental volume the managed care company is saying they will bring us?

4.After accepting the offer, what would we expect our average total cost per unit to be?

5.Assuming we DO accept their offer and using the new averages, what would the number of visits need to be to generate a profit of $200,000?