Esther is a physician with her own practice. She has developed contracts with se

Question

Esther is a physician with her own practice. She has developed contracts with several large employers to perform routing exams, fitness-for-duty exams, and initial screening of on-the-job injuries. She provides 100 exams per month, charging $100 per exam. Under this contract, she estimates her avoidable fixed costs attributable to the exams is $1,000 per month, and she pays a lab an average of $15 per exam. She has decided she needs to increase profit, so she is considering raising her fee to $125, even though there may be a 10 percent loss in the number of exams she does per month. If she does not change fees, what will be the revenues? If she does change fees, what will be the total contribution margin? If she does not change fees, what will be the product margin? If she does change fees, what will be the variable costs? If she does change fees, what will be the product margin?

Explanation / Answer

If she does not change fees, what will be the revenues? 10000 If she does change fees, what will be the total contribution margin? 12.5% If she does not change fees, what will be the product margin? 300% If she does change fees, what will be the variable costs? 2350 If she does change fees, what will be the product margin? 379%

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