Dr. Sarah Scott is a world-renowned surgeon who works for a university hospital. Sarah receives a handsome salary from the university. In addition, she writes grant proposals and receives funds from federal and private agencies to support her research. Sarah received grants totaling $2.5 million last year alone, and her total funding averages $4 million per year. In line with standard practice, the university adds, and the funding agencies pay, a 57% surcharge as overhead recovery. (This recovery is to cover administrative support, lab space, library, etc.) Sarah also generates considerable revenue to the university via her clinical service (i.e., operating on patients). Sarah often complains that she works for "free" as the patient revenue more than covers her salary.
Required:
How should the university evaluate Sarah's performance? Is she (and her lab) a profit center or a cost center?