$1)$What is the underlying cost structure or cost behavior of this service? What is the relevant range for this structure? Does the structure change if the contract is expected to bring in more than $30$ additional transplant patients? LOS: length of stay; OR: operating roomCreate the underlying cost structure $($cost behavior$)$ equation. What is the relevant range for this

cost structure?

$2.$ How do contract costs change if additional fixed costs are required when contract volume

exceeds $30?$ Assume first that fixed costs increase by $10$ percent. Then assume $20$ percent.

When answering this question, assume contract volumes of $31$ and $60.$

$3.$ What role do the following factors play in the decision as to whether or not to use marginal cost

pricing on the new contract?

a$.$ Reimbursement amounts paid by current transplant third$-$party payers.

b$.$ The amount of excess capacity in the transplant unit.

$4.$ What is your final recommendation regarding the base rate for Phase $4$ hospital services that

should be built into the contract? When answering this question, be sure to consider $(1)$ a long$-$

term pricing strategy and $(2)$ the impact of the contract on current payers, who are paying

roughly $$140,000$ for the services.