Doctor J. is considering purchasing a new blood analysis machine to test for leukemia; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. What would the profit be for a quantity of 8,500 leukemia blood analyses?

Doctor J. is considering purchasing a new blood analysis machine to test for leukemia; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. What would the profit be for a quantity of 8,500 leukemia blood analyses?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 5CE: Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the...

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Question: Doctor J. is considering purchasing a new blood analysis machine to test for leukemia; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. What would be his profit if he were to perform 5,000 leukemia blood analyses?
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A publishing company is planning on developing an SPSS Manual for graduatestudents in doctoral programs. The book will cost $16 to produce and will sell for$24; fixed costs will be $160,000. The company estimates that sales will beapproximately 60,000.a) What is the company’s breakeven point?b) Find the estimated profit.
Kath is considering investing 500,000.00 to open a Milk Tea Station near a mall. Based on her feasibility study, she can sell 12 large size of milk tea per hour at a price of 25.00 per bottle. She is planning to hire 2 crews, with an hourly rate of 25.00, to manage the store which will operate 8hours per day, 6 days per week, and 50 weeks per year. However, additional out-of-pocket miscellaneous cost is 8,500.00 per month. More so, she wanted to have her crews a 2-week vacation every year with pay. If the capital now is earning 15% annually and she must write off her investment within 5 years with desire rate of return of at least 20% on his investment, would you recommend the investment? Use the rate of return method and annual worth method in making your decision.
Dr. Magneto is evaluating whether to open a private MRI clinic in leased office space in a local strip mall. The clinic will run for two years and then close. Before the clinic opens, the offices require $200,000 of renovations. Dr. Magneto will buy $20,000 of computer equipment and one MRI machine. The MRI machine (GE 3.0T Signa Excite HD) costs $2.4M. Assume that the renovations, computer equipment, and MRI are paid for at the beginning of the first year (t=0) and that all three are classified as 15-year property (with depreciation rates of 5% and 9.5% in the first two years). Assume that the MRI machine will be sold for $500,000 at the end of the second year of business at which time the computer equipment will be worthless. The clinic can perform 72 scans per week for 49 operational weeks per year and will charge $600 per scan. The clinic will need two technicians, two receptionists, and one office manager. Wages, salaries, and other payroll costs (i.e., health insurance premiums)…
DM labs sell antimicrobial hand gloves. They sell these gloves to laboratories and hospitals. Each pack of gloves costs $10 to make and is sold for $25. The average laboratories or hospitals use 100,000 packs of gloves a year. DM labs are considering spending $5 million on advertising to supplement their sales force efforts. They want to charge the same price and recover that investment. How many additional packs of gloves would they need to sell? How many additional new customers would they need to acquire? A barbershop cuts hair for $40 per customer. It cost them $10 to cut one customer’s hair. The cost of running the store in a year is $15,000. The average customer cuts their hair 24 times a year. Compute the breakeven in unit volume. Apprentice Mousetraps wants to know how many units of its “Magic Mouse Trapper” it must sell to break even. The product sells for $20. It costs $5 per unit to make. The company’s fixed costs are $30,000.
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Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Assume that the cost of capital for the company is 8 percent. Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project and explain why it is not suitable for choosing among mutually exclusive investments.
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KNS estimates that if he purchases the new equipment and lowers his price to P44.55 per item, his volume will increase to about 4,700 units per month. Based on the local market, that is the largest volume he can realistically expect. WHAT SHOULD KNS DO?