This 5 page paper looks at a case study and shows the student how to calculate a if a proposed contract will be worth taking on. The paper uses fixed and variable costs to calculate the profit or loss with and without the proposal. All calculations are show. The bibliography cites 3 sources.
Name of Research Paper File: TS14_TEfixcase.rtf
Unformatted Sample Text from the Research Paper:
will be if the hospital can break even or make a profit if they are paid $500 per procedure. To asses the situation we need to consider both the fixed
and the variable costs and the impact that these will have. As these procedures are assumed to be in addition to the current procedures, it is possible that this would
have the impact of lowering the level of fixed costs per procedure and may increase the overall return (Elliott and Elliott, 1998). We are already provided with the current scenario,
we can compare this to the position if the contract does go ahead. Looking at the two scenarios the calculations come out like this Current position With the
addition contract Fixed costs (a) 300,000 300,000 Variable costs per procedure (b) 425 425 Number of procedures (c) 550 850 Total variable costs (d) (b x c) 233,750 361,250
Total costs (e) (d + a) 533,750 661,250 Income per procedure (f) 900 900 Total Income currently (g) (f x 550) 495,000 495,000 Managed care income per procedure (h) 500
Total Income Managed care (i) (h x 300) 150,000 Total Income currently (j) (i +g) 495,000 645,000 Profit/loss (j - e) -38,750 -16,250 These are the amended figures provided
by the student, we can see there is a benefit form the procedures from the managed care company. If these are undertaken the amount received is over the variable amount
and as such make a contribution towards the fixed costs, reducing the loss from 38,750 to 16,250. As this is a lower level of loss then the contract may be
worth considering. (b). Looking at this the average cost per operation this can be calculated easily, it is the variable cost plus the fixed cost divided by the