Question

Doctor J. is considering purchasing a new blood analysis machine for $60,000. He estimates that he could charge $80.00 for an office visit to have a patient's blood analyzed, while the variable cost of a blood analysis would be $30.00.

A) If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to perform 4,500 blood analyses each year, what will be the utilization of this machine under perfect conditions?

B) If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to be 80% efficient in his use of this machine, how many blood analyses does he plan to perform each year?

C) What would be his profit if he were to perform 5,000 blood analyses?

D) How many blood analyses would he have to perform in order to make a profit of $50,000?

Answer 1

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(A) Utilization = 75%

(B) Number of blood analysis each year = 4000

(C) Profit = $190,000

(D) Number of blood analysis for profit of $50,000 = 2200

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