Urban medical clinics operates four for- profit , on-demand medical facilities in the suburb of a large American cit. For the past quarter, the financial results are as follows.

The patient-related costs are variable at 65 percent of revenue. The other costs are related to the volume of

activity.

Home office administrative costs are allocated to each division at 10 percent of revenue.

Urban Medical's CEO has been concerned about the financial performance at the Enterprise.

Competition has reduced the number of individuals seeking medical assistance at the clinics, and East Center

has shown losses for four quarters in row.

In order to determine the causes of the relatively poor performance of the enterprise at the East Center clinic,

the CEO hires a consultant to analyse the work flows and process performance. After conducting a thorough

process analysis using a service Blueprint, the consultant discovers inefficiencies in occupancy caused by errors

in demand planning.

The CEO is considering various alternatives to increase the net income of the enterprise. Four options are

being considered.

1) Implement a $ 15,000 promotional campaign in the fast-growing South Center, which is expected to

Increase patronage at the clinic by 10 percent in the next quarter.

2) Extend operating hours until 10 p.m and offer weekend hours in order to attract commuting patients

who have difficulty scheduling medical procedures during the day.

3) Close the East Center Clinic

4) Improve operational performance at the East Center Clinic by licensing specialized software, which the

CEO plans to finance through bank debt at an effective annual interest rate of 4 percent.

Questions

1.Assuming the financial results continue as they have for the past quarter, what would be the effect on the

Overall profit/loss for Urban Medical Clinics if the East Center clinic were closed?

A) Profits would increase by $2,000

B) Profits would increase by $26,000

C) Profits would decrease by $2,000

D) Profits would decrease by $26,000

2.How will the profits of Urban Medical Clinics be affected in the next quarter if the promotional campaign

for the South Center Clinic is implemented?

A) Profits would decrease by $2,800

B) Profits would decrease by $10,100

C) Profits would increase by $2,080

D) Profits would increase by $33,800

3.The allocation of home office administrative costs in relation to the amount of revenue generated in an example

Of the cost allocation based on

A) Cause and effect

B) Benefits received

C) Cross subsidization

D) Ability to bear

4.Which of the following is a significant feature of the service Blueprint that is not found in tradition flowchart tools?

A) Costs are calculated for each operational step

B) Problems are prioritized by degree of significance

C) Customer -contact activities are separated from back -office activities

D) Root-cause analysis is performed for each significant problem

5.Closing the East Center Clinic would entail liquidating its fixed assets. At present, Urban Medical Clinics' books

show that East Center's net fixed assets are worth $1.76 million. The consultant has been discussing the

potential sale of these assets to other medical centers and is fairly confident that they can be sold for $ 1.2 million.

If Urban Medical Clinics effective tax rate is 35 percent, how much cash would the company generate by

Liquidating East Center's net fixed assets?

A) $780,00

B) $1,004,000

C) $1,200,000

D) $1,396,000

6. Issuing debt to improve operational performance at the East Center Clinic will raise the division's debt equity

Ratio to 20 percent. Assuming that the applicable tax is 35 percent and that there are no personal taxes or agency

Costs of debt,the likely impact of the change in capital structure on the cost of equity and cost of capital would

be which of the following?

Cost of Equity Cost of Capital

A) Decrease Increase

B) Increase Decrease

C) Increase No change

D) No change Decrease

7.Which of the following types of process variation is responsible for the inefficiencies at East Center Clinic?

A) Assignable

B) Random

C) Feedback

D) Signal

8. Urban Medical Clinics wishes to use its promotional effort for the South Center Clinic to reach consumers when

they are most receptive to information about the clinic. Which of the following is the most appropriate

promotional tool to achieve this objective?

A) Television advertisements during the local news broadcast

B) Radio ads scheduled during monitoring and evening commutes

C) Billboard advertisements at locations near retailing centers that are busy on weekends

D) Internet advertisements that display when users conduct searches for certain terms, such as

"cold remedies" or "treating the flu"

9.Local radio and television channels have offered to broadcast, at no charge, messages about Urban Medical's free

Saturday morning wellness clinics. This promotional tool is better known as

A) a public service announcement

B) an institutional advertisement

C) a trade promotion

D) a press release

10. Extending operating hours addresses which of the following characteristics of services marketing?

A) Intangibility

B) Perishability

C) Inseparability

D) Variability

North Center Clinic $ 320,000 East Center Clinic $ 280,000 West Center clinic $ 410,000 South Center Clinic $ 488,000 $ $ $ 208,000 30,000 182,000 33,000 266,500 36,000 $ $ 317,200 27,000 Service revenue Patient-related costs Occupancy costs Allocated administrative costs Other Costs TOTAL Net profit $ $ $ $ $ 32,000 41,000 311,000 9,000 $ $ $ $ 28,000 39,000 282,000 -2,000 41,000 $ 43,200 $ 386,700$ 23,300 $ 48,800 46,000 439,000 49,000 $ $