Question

Dr. Jones is interested in expanding his practice by adding 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 $1,564.29 for five years. Additionally, Dr. Jones must 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 are 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.

Answer 1

Dr. Jones' projected income is US$ 56.793, projected costs are US$ 61,935.48 and projected loss is US$ 5,142.48 for the 1st year of the radiology service.

Explanation:

1. Dr. Jones Income per year:

Income = 1,100 * 51.63

Income = US$ 56,793

2. Dr. Jones Costs

Equipment = US$ 1,564.29 loan cost monthly

Radiology tech salary = US$ 39,600 (including taxes and fringe benefits)

Variable cost = US$ 3.24 * 1,100

Equipment = 1,564.29 * 12 = US$ 18,771.48

Radiology tech salary = US$ 39,600

Variable cost = US$ 3,564

Total costs = Equipment loan cost + Radiology tech salary + Variable cost

Total costs = 18,771.48 + 39,600 + 3,564

Total costs = US$ 61,935.48

3. Dr. Jones Profit or Loss

Profit or loss = Income - costs

Profit or loss = 56,793 - 61,935.48 (Costs are higher than income)

Loss = US$ 5,142.48