finance
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Extracredituniversityhospital.docxUniversity Hospital
1. Average: 47 19
1437660
Fixed cost 60%: 862596
Marginal cost 40%: 575064
2. Total patients: 32
Agreed upon price: 90,000
Total earnings: 90000*32 = 2880000
Marginal cost per patient: 575064/12 = 47,922
Total marginal cost: 575064/32 = 1,533,504
Fixed cost: 862596
Total cost: 2,396,100
Expected profit: 483,900
3. Additional 20 patients:
Total patients: 32
Total marginal cost: 47922*32 = 1533504
Additional fixed cost: 200000
Total fixed cost: 1062596
Total cost: 2596100
Expected profit: 283900
Additional 40 patients:
Total patients: 42
Total marginal cost: 47922*42 = 2012724
Additional fixed cost: 200000
Total fixed cost: 1062596
Total cost: 2875320
Expected profit: 904680
4. a. Reimbursement amounts paid by current transplant third-party payers doesn’t matter for decision.
b. The amount of excess capacity in the transplant unit will increase earning.
c. The potential reaction by current payers to a new, lower price contract matters for the contract. But, the contractee has long term relationship
5. Base price rate may be set more lower than current $90000.
6. Long time pricing strategy will be profitable as fixed cost break-even after certain time.
