Seattle Grace Hospital plans to invest in a new piece of CT imaging equipment. T

Question

Seattle Grace Hospital plans to invest in a new piece of CT imaging equipment. The hospital estimates that it can bill $1,500 per scan. Preliminary market assessments indicate that demand will be fewer than 5,000 scans per year. The hospital is considering a scanner (scanner A) that will result in total fixed costs of $1 million per year and would yield a profit of $500,000 if the hospital produced and billed for 5,000 scans. What is the implied variable cost rate (variable cost per scan) for scanner A?

Explanation / Answer

ANSWER = C) $1200

Let variable cost = X

Sales value = $1500 * 5000 = 7,500,000

Less- cost = X

Less= fixed cost= 1,000,000

profit = 500000

= 7500000 - X - 1000000 = 500000

= X = 7500000-1000000- 500000

x = 6000000

Cost per unit = 6000000 / 5000 = $1200

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