You are considering starting a walk-in clinic. Your financial projections for th

Question

You are considering starting a walk-in clinic. Your financial projections for the  first

year of operations are as follows:

Number of visits 10,000 Utilities $2,500

Wages and benefits $220,000     Medical supplies $50,000

Rent $5,000 Administrative supplies $10,000

Depreciation       $30,000

Assume that all costs are  fixed  except supplies costs, which are  variable.

a. What is the clinic

Explanation / Answer

Fixed Costs: Utilities 2500 Wages and Benefits 220000 Rent 5000 Depriciation 30000 Total Fixed Cost 257500 Variable Cost: Supplies Cost Medical Supplies/Unit=10000/10000 1 Medical Supplies=50000/10000 5 Variable Cost/Unit=1+5 6 a>Fixed Cost=257500 and Unit Variable Cost=6 b>Expected Total Cost for 10000 units=257500+10000*6 317500 c>Total cost for 7500 units=257500+7500*6 302500 Total cost for 12500 units=257500+12500*6 332500 d>Average Cost at 7500=(302500/7500) 40.33 Average Cost at 10000=317500/10000 31.75 Average Cost at 12500=332500/12500 26.6

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