Question

A health care organization, StarCare, wants to implement a program to increase use of diabetes care services. In the past StarCare has billed insurance companies $350 per group session on cardiac care, a similar service, and thus plans to bill $350 for the diabetes group sessions. Operational expenses for the diabetes care services will be $1,000. Because StarCare is concerned with quality of services, it plans to have a consistent group size of 20 participants. However, the number of group facilitators will vary based on the number of diabetes care group participants. For every participant, it costs StarCare $300 in facilitator salary and other expenses. StarCare will only do one session if it is profitable. Based on this information, what are the (a) fixed costs for the proposed diabetes care program and the (b) the total variable costs for 20 participants?

Answer 1

a) The fixed cost is $1350.

b) Total variable cost is $6000.

Explanation:

a) The fixed cost = Operational cost + Insurance company bill.

= $ 1000 + 350 = $1350.

b) Variable cost:-

The number of facilitators = 20.

The salary for each facilitator = $300.

Total variable cost = $300 x 20 = $6000.