Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Instant Testing, a virus testing service company, has a test facility in Binghamton area. The fixed costs are $120,000 per year. Total variable cost for

Instant Testing, a virus testing service company, has a test facility in Binghamton area. The fixed costs are $120,000 per year. Total variable cost for each test, including costs of technician, materials and utilities, is estimated to be $200.

The company estimates that there would be 1200 tests done on an average at their facility per year.

  1. Estimate the total average cost per test for InstantTesting.
  2. Assume that the capacity of the facility is 2000 tests per year. If half-way through the year, an insurance company talks to the company to see if the testing service company can take 500 additional cases for the rest of the year, and the insurance company is willing to pay a price of $240 per test. The testing company thinks that they have enough capacity until the end of the year to accommodate those additional tests. Should the company accept the additional business at this price? Discuss.

If for the next year, InstantTesting is again forecasting 1200 test, and the same insurance company is interested in sending 500 additional cases, and is willing to pay a price of $240 per test, should instantTesting accept the offer? Discuss.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Business Finance

Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett

16th Edition

013749601X, 978-0137496013

More Books

Students also viewed these Finance questions

Question

Do teachers across cultures differ in immediacy? Explain.

Answered: 1 week ago