Case For Project - Cost Analysis*

Nov 22nd, 2013
Price: $20 USD

Question description

Case For Project - Cost Analysis*

An equipment acquisition proposal was being considered by a large health care organization. The array machine will enable the hospital to perform autoimmunity tests (for immunoglobulins G, M, and A and complements C3 and C4) in-house rather than sending them to a reference laboratory. Test turnaround time is expected to decrease by 2 days. The array machine costs $50,000, with a useful life of 5 years. The depreciation schedule will be $10,000/year.

The expected volume for tests is one of each of the five autoimmunity tests per day. Having the tests done by the reference laboratory costs the hospital an average of $10/test. The hospital's average charge to patients is $20/test. If the array machine is acquired and the tests done in-house, the costs of reagents would average $2/test.

The array machine can run a maximum of 40 patient samples and perform 20 different tests on each sample every 2 hours. Except in extraordinary circumstances, tests would be run Monday thorough Saturday.

The machine requires approximately 1 hour of technician time (valued at $15/hour) each day to calibrate it, to conduct a test run for control purposes and to perform general maintenance. This is a fixed cost because it does not vary by volume. Technician setup time to run tests is negligible. Beyond the five autoimmunity tests the laboratory wants to perform in-house, the machine can also perform apolipoprotein cardiac profiles that are currently done on equipment in the clinical chemistry department. The array machine can provide a quantitative measure and not just the positive or negative indicator that the clinical chemistry department's current equipment gives.

1. How many autoimmunity tests per year will have to be performed on the array machine to break even?

2. Given the present volume of tests, would there be an annual net contribution and, if so, how much?

3. If half of the patients have Medicare coverage (DRG reimbursement includes all tests), would the laboratory break even on the equipment? If not, should the equipment be acquired anyway?

 The response should be 8-10 slides including charts. Power Point is the preferred format for this assignment.

The response should provide a rationale and discussion regarding each step you take. Create a narrated PowerPoint presentation (be sure to include a transcript of the narrated portion - or you may include the transcript of the narrative in the notes section of the slide). Be sure to let me know where the transcript is located if you decide to create a narrated presentation.

Question 1: Breakeven =Fixed Cost/Price-Variable Costs

Question 2: P(x) FC VC(x) NC


P= price


FC=Fixed Costs

VC= Variable Costs

NC=Net Contribution

Question 3: List out pro’s for purchase or con’s for purchase. Be thorough and make a yes or no decision.

Sometimes students have difficulty uploading Excel spreadsheets into the Power Point. If this is the case for you, please just upload the Excel Spreadsheet separately.

*Longest, B.B., Rakich, J.S., & Darr, K. (2000). Managing health services organizations and system. Baltimore: Health Professions Press.

Tutor Answer

(Top Tutor) Daniel C.
School: Rice University

Studypool has helped 1,244,100 students

Review from our student for this Answer

Nov 24th, 2013
"Top quality work from this guy! I'll be back!"
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1819 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors