Question

1. 2 Assume that a cardiologist group practice has the following cost structure:

Fixed Cost: $500,000         Variable Cost Per Procedure: $25

Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.

A. What is the group’s underlying cost structure?

    B. What are the groups expected total cost?

C. What are the groups' estimated total costs at 5,000 procedures? At 10,000 procedures?

D. What is the average cost per procedure at 5,000, 7,500 and 10,000 procedures?

You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:
Number of Visits	10,000	Utilities	$2,500
Wages and Benefits	$220,000	Medical Supplies	$50,000
Rent	$5,000	Administrative Supplies	$10,000
Depreciation	$30,000
Assume that all costs are fixed except supplies costs, which are variable.
What is the clinic’s underlying cost structure?
What are the clinics expected total cost?
What are the clinic’s estimated total cost at 7,500 visits? At 12,500 visits?
What is the average cost per visit at 7,500, 10,000 and 12,500 visits?

Answer 1