Question
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
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?
COSTS AND REVENUES FOR URGENT CARE CENTER
COSTS: Urgent Care Center
All costs and revenues are per year
Labor Cost
o3 Primary Care Physicians Salary$150,000 $450,000
o5 RN/BSN Salary Salary $65,000 $325,000
oPayroll Taxes (all employees) $200,000
oBenefits (all employees) $1,162,500
Other Variable Costs
oSupplies & Misc. Overhead$102,400
oAdvertising$35,000
TOTAL VARIABLE COST$2,274,900
Capital Cost
oAnnualized Building Cost$292,487
oAnnualized Equipment Cost$58,497
Other Fixed Costs
oInsurance$214,491
oLegal$146,244
oAdministrative$263,238
oAdministrative Fee to Franchise$120,000
TOTAL FIXED COST$ 1,094,957
REVENUES: Urgent Care Center
Each for the three (3) primary care physicians can see 3500 patients in a year, at an average annual fee per patient of $350.
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started