expand or reduce decision | cipdpro.co.uk

expand or reduce decision | cipdpro.co.uk

Expand- or – reduce decision. Laurie Vaden is a physician with her own practice. She has developed contracts with several large employers to perform routine exams, fitness – for – duty exams, and initial screening of on – the- job injuries. She provides100 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 a10 percent loss in the number of exams she does per month. Determine the current and predicted: 1. revenues, 2. variable costs, 3. and total contribution margin. 4. What do you recommend she do? Why?

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