Reference no: EM132502150

You are a radiologist trying to decide whether or not to buy an open MRI machine. The machine costs $2.6 million. You believe you can charge a premium for an open MRI and can realistically get $1,500 per scan. The cost of labor for your tech is about $150 per scan, as well as the value of your own time, which you put at $200.

Question a. What is the break-even quantity of scans to pay for the MRI machine?

Question b. A few months after you purchase the machine, you realize that the revenue model is more complex. Although your costs estimates were correct, your revenue comes at three different levels: you get $1,500 per scan for privately insured patients; $1,100 for Medicare patients; and $650 for Medicaid patients. The breakdown of your patient group is about 55 percent privately insured; 30 percent Medicare; and 15 percent Medicaid. Now, what is the break even quantity?