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You are evaluating ways to expand an optometry practice and its earnings capacity, Optometrists perform eye exams prescribe corrective lenses (eyeglasses and contact lenses), and
You are evaluating ways to expand an optometry practice and its earnings capacity, Optometrists perform eye exams prescribe corrective lenses (eyeglasses and contact lenses), and sell corrective lenses. One way to expand the practice is to hire an additional optometrist The annual cost of the optometrist, including salary, benefits, and payroll taxes, is $63,000. You estimate that this individual can conduct two exams per hour at an average price to the patient of $45 per exam The new optometrist will work 40-hour weeks for 48 weeks per year. However, because of scheduling conflicts, patient no shows, training, and other downtimes, the new optometrist will not be able to conduct, bill, and collect 100 percent of his or her available examination time. From experience, you know that each eye exam drives additional product sales. Each exam will lead to either an eyeglass sale with a net profit (revenue less cost of sales) of $85 or a contact lens sale with a net profit of $65 (not including the exam fee). On average, 60 percent of the exams lead to eyeglass sales, 20 percent lead to contact lens sales, and 20 percent of the exams lead to no further sales Besides the salary of the optometrist additional costs to support the new optometrist include these; Office occupancy costs Leased equipment Office staff $1,200/year $330/year $23,000/year Required: 1 In terms of the percentage of available time: What is the minimum level of examinations the new optometrist must perform to recover all the incremental costs of being hired? Show your answer step by step. 2 Evaluate the performance of the firm
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