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Posted on May 19, 2024

I asked a question yesterday and didn't get any responses. As a starting point for the analysis, Davis collected the most recent financial and operating

I asked a question yesterday and didn't get any responses.

As a starting point for the analysis, Davis collected the most recent financial and operating data for the center, which are summarized in the case study Exhibit 1.1. Next, Davis met with the center's operational director several times. The primary purpose of the meetings was to estimate the additional costs that would emerge if the center volume increased above the current level of 45. Any incremental usage would require additional expenditures for administrative and medical supplies, estimated to be $5.00 per patient visit for medical supplies (tongue blades, rubber gloves, etc.), and $2.00 per patient visit for administrative supplies (file folders, clinical record sheets, etc.).

Because of the relatively low volume level, the urgent care center has purposely been staffed at the bare minimum. In fact, some center employees have started to grumble about not being able to do their jobs properly because of overwork. Thus, any increase in the number of patient visits would require immediate administrative and medical staffing increases. Furthermore, as the number of visits increase, the center would have to hire additional staff members. The incremental costs associated with increased volume are summarized in Exhibit 1.2.

Finally, Mary met with Sarah to learn more about the proposed marketing program. Sarah believes that a strong marketing effort could bring additional patients to the center. The proposed marketing effort requires a marketing assistant plus advertising costs for newspaper, radio, and TV ads as well as for brochures and handouts. The incremental costs associated with the marketing campaign are summarized in Exhibit 1.2.

With a blank spreadsheet on her computer screen, Mary began to construct a model that would provide the information needed to help the board make a rational, informed decision. Specifically, Mary wanted to develop answers for the following questions:

What is the projected profitability of the urgent care center for the entire year (2020) if volume continues at its current level?
How many additional visits per day would be required to break even without the new marketing campaign?
How many additional visits per day would be required to break even assuming that the new marketing effort is undertaken?

Documentation:

Incremental Monthly Costs:

Number of Additional Visits per Day 0 1-10 11-20 21-30 31-40 Variable costs:

Medical supplies 5 per visit

Administrative supplies $2.00 per visit

Total variable costs per visit 7.00 per visit

Summary Financial Statements:

Number of Additional Visits per Day

0 5 10 15 20 25 30 35 40

Total monthly visits 0 150 300 450 600 750 900 1050 1200

Total daily visits 0 5 10 15 20 25 30 35 40

Net revenue per visit #DIV/0! 0 0 0 0 0 0 0 0 Total net monthly revenue 0 0 0 0 0 0 0 0 0