Dr. Massy, who specializes in internal medicine, wants to analyze his sales mix

Question

Dr. Massy, who specializes in internal medicine, wants to analyze his sales mix to find out how the time of his physician assistant, Consuela Ortiz, can be used to generate the highest operating income.
Ortiz sees patients in Dr. Massy's office, consults with patients over the telephone, and conducts one daily weight-loss support group attended by up to 50 patients. Statistics for the three services are as follows:
.................................... Office Visits.................. Phone Calls................... Weight-Loss Support Group
Maximum number
of patient billings per day....... 20............................. 40.................................... 50
Hours per billing................... 25............................ .10 .....................................1.0
Billing rate............................. $50 ..........................$25................................... $10
Variable costs..................... $25.............................. $12.................................... $5

Ortiz works seven hours a day.


1. Dr. Massy believes the ranking is incorrect. He knows that the daily 60-minute meeting of the weight-loss support group has 50 patients and should continue to be offered. If the new ranking for the services is (1) weight-loss support group, (2) phone calls, and (3) office visits, how much time should Ortiz spend on each service in a day? What would be the total contribution margin generated by Ortiz, assuming the weight-loss support group has the maximum number of patient billings?

Thank you so much for your help!! It's a great learning experience :)

Explanation / Answer

One group for 1 hour
40 phone calls for 4 hours (40*.1 = 4)
the rest of the time spent on visits, 2 hours

daily contribution margin
group: $250
calls: 4*$130 = $520
visits: 2*100 = $200
= total $970

(contribution margin per hour:

office visits: (50-25)/.25 = $100 per hour

phone calls: (25 - 12)/.1 = $130 per hour

group: (10 - 5)/1 = $5 per hour*50 = $250 per hour

ranking: group, phone call, office visit)

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