1. What is the estimate of the marginal cost of the Phase 4 hospital services? (Assume,...

 

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1. What is the estimate of the marginal cost of the Phase 4 hospital services? (Assume, as given in the case, that 60 percent of the designated costs are fixed and the remaining costs are variable.) 2. Create the underlying cost structure (cost behavior) equation. What is the relevant range for this structure? Does the structure change if the contract is expected to bring more than 30 additional transplant patients? 3. What fixed cost proportion is required to force the average variable cost for Phase 4 hospital services to be $90,000? 4. Now assume that the fixed cost proportion is only 50 percent. What price must be set to cover variable costs? What if the fixed cost proportion is 70 percent? 5. Return to the original assumption (60/40) regarding fixed cost percentages. How do contract costs change if additional fixed costs are required when contract volume exceeds 30? Assume first that fixed costs increase by 15 percent, then assume 20 percent, and finally 25 percent. When answering this question, assume contract volumes of 31 and 60. 1. What is the estimate of the marginal cost of the Phase 4 hospital services? (Assume, as given in the case, that 60 percent of the designated costs are fixed and the remaining costs are variable.) 2. Create the underlying cost structure (cost behavior) equation. What is the relevant range for this structure? Does the structure change if the contract is expected to bring more than 30 additional transplant patients? 3. What fixed cost proportion is required to force the average variable cost for Phase 4 hospital services to be $90,000? 4. Now assume that the fixed cost proportion is only 50 percent. What price must be set to cover variable costs? What if the fixed cost proportion is 70 percent? 5. Return to the original assumption (60/40) regarding fixed cost percentages. How do contract costs change if additional fixed costs are required when contract volume exceeds 30? Assume first that fixed costs increase by 15 percent, then assume 20 percent, and finally 25 percent. When answering this question, assume contract volumes of 31 and 60.

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1 Estimating the marginal cost of Phase 4 hospital services Given that 60 of the costs are fixed the remaining 40 are variable To calculate the margin... View the full answer