CVP Analysis The Brenham Hospital’s Cardiac Diagnostic Screening Center (CDSC) is contemplating purchasing a blood gases analysis machine at a cost of $800,000. Useful life for this machine is 10 years. The screening center currently serves 4,000 patients per year, 35% of whom need blood gases analysis data as part of their diagnostic tests. The blood samples are presently sent to a private laboratory that charges $125 per sample. In-house variable expenses are estimated to be $75 per sample if CDSC purchases the analysis machine.
Required
1. Determine the indifference point between purchasing the machine or using the private laboratory.
2. Use the Goal Seek function in Excel to determine the indifference point calculated in requirement 1 above.
3. Determine how many additional patients would be needed so that CDSC would be indifferent between purchasing the analysis machine and the $125 lab charge.
4. Determine the amount of the private laboratory charge so that CDSC would be indifferent as to purchasing the analysis machine or using the private laboratory, assuming the current service level of 4,000 patients per year.
5. What other considerations are relevant to this decision?
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