Question 1: Feasible Range for the Urgent Care Center

In order to justify our scale of operation we must be able to attract enough patients to be inside the feasible range of production. The feasible range is governed by the way productivity changes as more staff must share the fixed resources. Unfortunately it is rare for detailed information about productivity to be available to decision-makers. However because of the one-to-one correspondence between productivity and cost, we can see the boundaries of the feasible range reflected in our variable costs, and these costs are always available to decision makers on a detailed and up-to-date basis.

Step 1: Find Average Variable Cost by dividing the Total Variable Cost by the total number of patients served by all three physicians, given under Revenues.

Step 2: The fee per patient is also given under Revenues. Does the fee per patient cover the Average Variable Cost?

Question 2: Breaking Even for the Urgent Care Center

In the short run it is enough to establish that your scale of operation is justified, but in the long run we have to cover our capital costs as well as our labor and other variable costs.

Step 1: Find the Total Cost by summing the Total Variable Cost and Total Fixed Cost.

Step 2: Find the Average Total Cost by dividing Total Cost by the total number of patients served by all three physicians.

Step 3: Does the fee per patient cover the Average Total Cost?

Question 1: Feasibility of Urgent Care Center

Step 1: Find Average Variable Cost

Step 2: Does the fee per patient cover Average Variable Cost?

If Yes, the facility is operating in its feasible range. If No, the facility should reduce its scale of operation.

Question 2: Breakeven for the Urgent Care Center

Step 1: Find Total Cost

Step 2: Find Average Total Cost

Step 3: Does the fee per patient cover Average Total Cost?

If Yes, the facility is breaking even. If No, the facility is operating at a loss.