Suppose that all fixed costs are avoidable

Assignment Help Business Economics

Reference no: EM131011250

The administrator of ABC Hospital, Mr. Stevens, has just received the latest financial report, and the news is not good. The hospital has been losing money for over a year, and if things don't improve, it may lose its AA bond rating. Stevens has met with his vice president of finance, Mr. Sanger, and as asked him to identify areas for cutting costs, beginning with services that are operating at a loss. The following information is for services provided at ABC Hospital's ambulatory care clinic. Annual volume (in patient visits) = $7,000 Care per visit = $155 Variable cost per visit = $45 Fixed costs = $700,000 1) Suppose that all fixed costs are avoidable. What should Sanger recommend to Stevens regarding dropping the clinic? 2) What if only $300,000 of the fixed costs were avoidable? Would this change his recommendation? 3) Are there any other considerations that should be taken into account when making this decision?

Reference no: EM131011250

Questions Cloud

What level of reduction corresponds to lowest average cost : What level of reduction corresponds to the lowest average cost per pound of pollutant? What would be the resulting average cost to the nearest dollar?

What is the value of building if the first annual cash flow : A building is expected to generate no cash flows for several years and then generate annual cash flows forever. What is the value of the building if the first annual cash flow is expected in 3 years from today, the first annual cash flow is expected ..

Determined that a rate of return : Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,200, $10,200, and $16,400 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has deter..

Analyzes the future impact of your social problem : Complete a 5-7 page final paper that analyzes the future impact of your social problem (POVERTY). In this assignment, you will cover: The scope of this social problem over the last 30-50 years. (note: you will need to use historical data to articul..

Suppose that all fixed costs are avoidable : The administrator of ABC Hospital, Mr. Stevens, has just received the latest financial report, and the news is not good. The hospital has been losing money for over a year, and if things don't improve, it may lose its AA bond rating. What if only $30..

Find a vector perpendicular to the tangent line : Cosider the function f(x,y) = x2 +(y2)/4 and the level curve at z = 1 is the ellipse x2+(y2)/4=1. Find a vector perpendicular to the tangent line of this level curve at (1/(2)(1/2), (2)(1/2)).

Describe a psychology career : Describe a psychology career. Provide a summary of education and skills necessary for that career and Assess the steps you need to take, personally and professionally, to be successful in the particular career

What is the one-year interest rate expected one year : Suppose we look in the newspaper and find the following rates: the rate on 1-year securities is 4.65%, on a similar 2-year security 6.24%, and a 3-year security 6.67%. If the unbiased expectations theory of the term structure of interest rates holds,..

Traditional religion and native american religions : Identify key concepts of both African traditional religion and Native American religions. Based on these concepts, what similarities are there among these two groups? How do they differ?

User Account

All Pages