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Dr. jones is interested in expanding his practice

Dr. Jones is

interested in expanding his practice by

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add

ing

a piece of radiology equipment.

The basic

cost of the equipment would be $79,000 for the first year.

The monthly loan cost for this equipment

is $1,5

64.29 for five years.

Additionally Dr. Jones

will have to

factor in the cost to

hire a radiology tech

with a predicted

$39,600 annual

salary

(this includes all taxes and fringe benefits).

The office already

has a radiology room so there is no fixed costs

associated with this purchase.

You

help Dr. Jones

determine that

the office will

do 1100 studies per year with an average

reimbursement of $51.63.

The variable cost per study is $3.24.

Using the standard pro forma sheet, is this a good purchase?

Part #2

Dr. Jones’ office has

purchased the above equipment.

It is now Year #2 and there is a $7,000 annual

m

aintenance fee that needs to be

added to the costs of the equipment.

The variable cost is now

$3.37

per study

but

Dr. Jones’ office is

planning on

doing

1675 studies

because there has been an

addition of two new managed contracts and

there has been a

reimbursement increase to $53.16

What is the profit or loss this year?

Looking at the two years together, was this a good purchase

?

Part #3

Using the informa

tion in

Part

#1 and #2, calculate

the standard pro forma sheet

year

s

#3

through year

#

6.

The changes

to be considered in your calculations

are

the following

Year #3

Variable Costs

$3.43

Staff Costs

$ 40

,

500

# of Estimated Studies

1750

Reimbursement

$54.26

Year #4

Variable Costs

$3.68

Staff Costs

$ 40

,

500

# of Estimated Studies

1800

Reimbursement

$54.99

Year #5

Variable Costs

$3.83

Staff Costs

$ 41

,

500

# of Estimated Studies

1850

Reimbursement

$55.33

Year #6

Variable

Costs

$3.97

Staff Costs

$

42

,

000

# of Estimated Studies

1900

Reimbursement

$56.00

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