Question

Q84

A private health-care clinic has been offered a leasing deal where it could lease a CAT scanner at a fixed charge of $2,000 per month and a charge per patient of $6 per patient scanned. The clinic currently charges $10 per patient for taking a scan. (a) At what level of demand (in number of patients per week) will the clinic break even on the cost of leasing the CAT scan? (b) Would a revised lease that stipulated a fixed cost of $3,000 per week and a variable cost of $0.2 per patient be a better deal? [3 Marks]

Answer 1

(a) At what level of demand (in number of patients per week) will the clinic break even on the cost of leasing the CAT scan?

Fixed Cost = 2000

Variable Cost Per Unit = 6

Sales Price Per Unit = 10

Break Even Point = Fixed Costs/ (Sales Price Per Unit - Variable Cost Per Unit)

= 2000/(10-6)

= 500 patients per month

= 125 patients per week.

(b) Would a revised lease that stipulated a fixed cost of $3,000 per week and a variable cost of $0.2 per patient be a better deal? [3 Marks]

Fixed Cost = 3000

Variable Cost = 0.2

Sales Price Per Unit = 10

Break Even Point = Fixed Costs/ (Sales Price Per Unit - Variable Cost Per Unit)

= 3000/(10-0.2)

= 306 Patients per month

= 76.5 patients per week.

It’s a better deal, because as per fixed cost 3000 and variable cost 0.2, the clinic will reach the break-even point in just 76.5 customers. But with Fixed cost 2000 and variable cost 6, the clinic needs to have 125 patients per week.