Question

EX. 5.7

Roanoke Medical Center, in partnership with Interfaith Healthcare Ministries, is opening a free clinic to help provide primary care services and chronic disease management services for the uninsured and alleviate some of the strain on the hospital's emergency room. The initial proposal for the facility layout is based on a similar clinic operating in Lynchburg, Virginia. However, an operations analyst at the Roanoke Medical Center has proposed an alternative layout believed to provide efficiency savings over the initial proposal. While thee clinic is not yet operational, deposits have already been placed with contractors to implement the initial layout. As a result, switching room locations will cost $8,000 each, with the exception of the dental and vision care areas, which will cost $15,000 to move. It is estimated to cost $.50 to travel a foot. Table EX 5.7 displays the initial and alternative layouts for the Roanoke clinic.

Table 5.7

Initial Layout

Primary Care

Vision Care

Community Pharmacy

Women’s Health

Dental Care

Mental Health

Total Transportation Cost x distance =$78,615

Alternative Layout

Primary Care

Woman’s Health

Community Pharmacy

Mental Health

Dental Care

Vision Care

Total Transportation Cost x distance =$140,000

1. Confirm whether the analyst’s alternative proposal provides efficiency savings. If so, what are the efficiency savings of the layout
2. What is the cost to switch room locations to implement the alternative proposal?
3. How long would it take to recover the costs of implementing the layout in the alternative proposal?

*This is all the information that was provided to answer the question

Answer 1

Answer (A) :-

The analyst's alternative proposal does not provides the efficiency saving in terms of the transportation cost.

The Initial layout of the given model transportation cost is

Total Transportation Cost x distance =$78,615

it is given that it is estimated to cost $.50 to travel a foot.

Therefore the total foot it will travel is $78615/$0.50 = 157230

and for the proposed layout model the transportation cost given is $ 140000

and the total foot it will travel is $ 140000/$0.50 = 280000

Hemce the proposed layout is not beneficial for the above company it is suggested that it should go for the initial outlay.

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Answer (B) :-

The cost to switch room locations to implement the alternative proposal is for two department which is Women's Health and Mental Health $15000 * 0.50 = $ 7500

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Answer (C) :-

It will take to recover the costs of implementing the layout in the alternative proposal by the difference of initial and proposed which is 280000 - 157230 = 122770 steps or $61385 plus additional cost of $7500 .

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