This question regards variable, fixed and step-fixed costs.Travis County Clinic wants to create a budget for a proposal to provide children with vaccinations and other basic preventive services on a sliding scale.

In order to serve 10,000 children you have estimated the following costs: Variable costs (per child served): Vaccinations: $ 30 Other medical supplies: 45 Laundry: 2 Other: 10

Step-fixed costs: One physician's assistant (PA) per 3,000 children served annually; salary $130,000 per year, incl benefits.

Fixed costs: Administration: $ 90,000 per year

Rent: 75,000 per year Other: 10,000 per year

1. Calculate the annual costs of running the program for 10,000 children.

2. Explain the assumption of step-fixed costs in this case. While in theory, one might be able to hire a part-time PA to treat 3,000 children, why in practice would Travis County need to hire four PAs to treat 10,000 patients?