On an average, 55,000 patients get a chest x-ray at Bing Diagnostics. Price of each chest x-ray is $115. The cost incurred by Bing on each chest x-ray is $69. Half of this chest x-rays are done on Aetna patients. Aetna approached Bing, and offered a deal if they provided a discount on the price. Below are the two main points to consider from Aetna's offer: a. Aetna will send 25,000 more patients to Bing b. Bing has to provide a discount of 45% for all Bing patients, Currently Bing's fixed costs are $300,000 per year. If they take on the additional patients Aetna has to offer, Bing's fixed cost will increase to $415,000. Address the following: 1. What is the best decision for Bing in this case? Make sure you have detailed explanation of your decision. Hint: you have to calculate and compare 3 different scenarios. Make sure to label them appropriately. (10 points) 2. You must show calculations. (5 points) 3. You must provide the following information: a. Variable costs (individual & total for each scenario) (3 points) b. Fixed costs (for each scenario) (3 points) c. Total Revenue (for each scenario) (3 points) d. Total Expenses (for each scenario) (3 points) e. Total Profit/Loss (for each scenario) (3 points) 4. If you reject, what is your rationale? Explain clearly, in detail. (5 points) 5. Now think about a negotiation. What would you want to change about this to make it lucrative for both Aetna and Bing? Make sure to justify your offer by showing calculations. (5 points) On an average, 55,000 patients get a chest x-ray at Bing Diagnostics. Price of each chest x-ray is $115. The cost incurred by Bing on each chest x-ray is $69. Half of this chest x-rays are done on Aetna patients. Aetna approached Bing, and offered a deal if they provided a discount on the price. Below are the two main points to consider from Aetna's offer: a. Aetna will send 25,000 more patients to Bing b. Bing has to provide a discount of 45% for all Bing patients, Currently Bing's fixed costs are $300,000 per year. If they take on the additional patients Aetna has to offer, Bing's fixed cost will increase to $415,000. Address the following: 1. What is the best decision for Bing in this case? Make sure you have detailed explanation of your decision. Hint: you have to calculate and compare 3 different scenarios. Make sure to label them appropriately. (10 points) 2. You must show calculations. (5 points) 3. You must provide the following information: a. Variable costs (individual & total for each scenario) (3 points) b. Fixed costs (for each scenario) (3 points) c. Total Revenue (for each scenario) (3 points) d. Total Expenses (for each scenario) (3 points) e. Total Profit/Loss (for each scenario) (3 points) 4. If you reject, what is your rationale? Explain clearly, in detail. (5 points) 5. Now think about a negotiation. What would you want to change about this to make it lucrative for both Aetna and Bing? Make sure to justify your offer by showing calculations. (5 points)
