Solution:

Decision:

As there is a decrease in the product margin, the organization should not make the change in price

with the resulting change in volume. If it did, it would be worse off by: $$1,500$

A more thorough analysis would also look at the eifects on all services over time.

Expand$-$or$-$reduce decision. Janet Gilbert is director of a lab. She has some extra capacity and

has contracted with some small neighboring hospitals to run some of their lab tests. She has re$-$

cently had a study conducted and has determined that her costs for these contracts are $$60,000,$

of which $$10,000$ is the variable cost of supplies. The rest is nonavoidable fixed cost. She cur$-$

rently charges an average of $$35$ per test. She is thinking of lowering her price by $10$ percent in

hopes of ralsing her current volume of $30,000$ tests by $30$ percent. If she does so$,$ she expects her

variable cost per test will go up by $5$ percent. Determine the current and predicted $($a$)$ revenues,

please put the numbers in the template