Question: On a full-cost (or full absorption) basis, how profitable was the dialysis unit last year? Please structure your income statement in a form such that

On a full-cost (or full absorption) basis, how profitable was the dialysis unit last year? Please structure your income statement in a form such that you clearly label and identify the costs by behavior: variable costs, step-function costs, and fixed costs

2. Dr. Lawrence says that it costs $425 per dialysis procedure. How did he calculate that figure? What, if anything, is wrong with his calculation?

3. Assume that the volume this year will be 3,120 procedures (20 patients, 3 times per week, 52 weeks in a year). At that level of volume, how "profitable" will the dialysis unit be this year? Be sure you calculate the new direct costs, and that you estimate, as best you can, this year's allocated (or indirect) costs.

4. What is the unit contribution margin of a dialysis procedure?

How might Dr. Newell use this number in thinking about his options? For example, how might he use it to calculate the "breakeven volume" of the dialysis unit?

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