Realizing the Dream: Decision-Making in Action

1. Identify and compute the various types of cost for the company according to cost behavior. Determine the monthly fixed and variable costs for scan and lab services that the company incurs.

2. Assume that GEO Medical Laboratory only provides scan services, and determine the breakeven in terms of units and sales. If the only services that GEO Medical Laboratory offers are lab services, determine the number of patients that the company would need to help in order to break even, as well as the break-even amount. Assume that the salary of the administrative assistant is evenly

distributed between the two services and the usage of furniture and fittings, computer, and printer are equally shared. What does your answer imply?

3. Determine the cost structure of GEO Medical Laboratory. Is the company highly or lowly leveraged?

4. Assuming a multiproduct situation, how many patients and how much total revenue does GEO Medical Laboratory need to break even in a month?

5. How many patients must GEO Medical Laboratory attend to in a month if it wants to make a profit of US$3,000? How many of these patients should be scheduled for lab services and how many for scan services?

6. Determine the amount of revenue that the company needs to generate in a month to earn an operating profit of US$3,000. How much of this revenue will be generated from lab and scan services, respectively?

7. Based on quantitative calculations, should Wallas accept the school's offer? Why or why not?

8. Besides profitability, what other motives might influence Wallas' decision about the offer from the local school? Discuss how such offers might benefit (or harm) GEO Medical Laboratory.

9. Give Wallas at least three specific recommendations to increase revenue or to reduce the costs for his company. Which of these three recommendations do you think is the best for Wallas right now and why? Be clear about why this recommendation is preferred.