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What is the expected profit

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Question - Assume that you have been hired as a consultant to recommend a fixed price (the base rate) that should be proposed in the contract negotiations for Phase 4 hospital services. To help in the analysis, Mark has indicated that approximately 60 percent of nursing, ancillary, operating room, and laboratory costs are fixed. The remaining costs-radiology, drug, and other services-are predominantly variable.

Nursing (fixed) $13,314 X 0.6 $7,988

Ancillary (fixed) $53,245 X 0.6 $31,947

Operating room (fixed) $5,906 X 0.6 $3,544

Lab (fixed) $8,097 X 0.6 $4,858

Radiology (variable) $1,389 X 0.6 $833

Drugs (variable) $15,268 X 0.6 $9,161

Other (variable) $22,586 X 0.6 $13,552

$119,805 X 0.6

TOTAL: $71,883

Assume that the additional patients will add $200,000 in total to the Center's fixed costs. Now what is the expected profit on 20 new patients? On 40 new patients?

Reference no: EM133028290

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