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A clinic has the fixed and variable costs shown below. A health maintenance organization offers to send 500 patients per year but only offers to pay $300 for each one. Should the clinic agree to this arrangement? It currently has 2,500 patients per year and can easily handle 3,000.
Variable Cost Per Patient Fixed Costs Per Year
Personnel $150 Rent $100,000
Supplies 20 Administrative 120,000
Laundry 30 Other 80,000
Other 50
Discuss how sensitivity analysis can be utilized in cost control using examples when preventative or detective objective measure values are not available.
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