Question

You have been hired as the manager for a new clinical lab company in the Atlanta metropolitan area. The lab is a nonprofit that serves low-income patients in the downtown area. The lab is in the process of setting its fees-for-services on individual services. The clinic director has estimated fixed costs of $436,000, a volume of 18,500 tests, and variable cost rate of $19.

She has asked you to prepare a PowerPoint presentation for the lab’s board of directors, explaining variable and fixed costs for healthcare services in the lab. Prepare a 7 to 10 slide PowerPoint that explains the following items.

• Figure the price breakeven for the clinic.
• List and explain fixed costs that the lab will have.
• List and explain variable costs per visit that the lab will encounter.
• The board will need to be aware that pricing may change if estimated costs are not accurate. If fixed costs end up being $397,500, how will the price breakeven change?
• Explain how these pricing or volume changes may affect the lab.

Use your imagination or do whatever research is necessary to come up with some of the fixed and variable costs to present to the board. Feel free to use any graphics or images in your project that you feel would enhance the presentation. You are required to use the Notes section of PowerPoint to explain information on the slides to the board. You are required to use at least your textbook for the assignment.

Answer 1

	Income Statement
	Particulars	USD/test	(in USD)	Remarks
	Sales	42.57	787500	Balancing figure to arrive to Break even
	Variable cost	19.00	351500
	Gross Profit	23.57	436000
	Fixed Costs	23.57	436000
	Net income/Breakeven	-	-
	Fixed Cost : Cost doesn't change over the short term. It is ireespective of sales
a	Salaries and Wages : Amount paid to Doctors, nurses, admin and accounting staff of lab
b	Rent: Rent paid to landlord for the building
c	Amortisation/Depreciatoin on Fixed Assets employed
d	Insurance expense on machines and equipments
e	Utilities. This is the cost of electricity, gas, phones, and so forth. This cost has a variable element, but is largely fixed
	Variable Cost
a	Hourly employees/Contractual staff which are directly related to testing
b	Material Consumptions Cost like injections cost used for testing, supplies cost linked