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#### Exercise: 1) A clinic has \$ 1 million in revenues and \$ 950,000 in cost, what is its operating margin? 2) The owner of the clinic in Exercise 11

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Exercise:

1) A clinic has \$ 1 million in revenues and \$ 950,000 in cost, what is its operating margin?

2) The owner of the clinic in Exercise 11.1 invested \$ 400,000. What is the return on investment? Is it adequate?

3: A laboratory has \$ 4.2 million in revenues and \$3.85 million in cost. What is its operating margin?

4: The owner of the laboratory in Exercise 11.3 invested \$ 6 million. What is the return on investment?

5: A not-for- profit hospital realizes a 3 percent return on its \$ 200,000 investment in its home health unit. Its current revenue after discounts and allowances is \$ 382,000. Administrative costs are \$ 119,000, clinical personal cost is \$ 210,000, and supply cost is \$ 47,000. Providing home health care is not core goal of the hospital, and it will sell the home health unit if it cannot realize a return of at least 12 percent. A process improvement team has recommended significant changes to the home health unit are billing process. The team has concluded that these changes could reduce cost by \$ 20,000 and increase revenues by \$5,000. Analyze the data that follows and assess whether the change would make the home health unit profitable enough to keep.

 Old New Revenue \$382,000 \$387,000 Cost \$376,000 \$356,000 Profit \$6,000 \$31,000 Return on Investment 3% 16%

6: The table shows cost and revenue data for an outpatient surgery clinic. Calculate the clinic’s marginal cost, marginal revenue, and profit at each level of output. Which price maximizes its profit?

 Surgeries 250 300 350 400 450 Price \$ 2,000 \$ 1,920 \$ 1, 800 \$ 1,675 \$1,550 Revenue \$500,000 \$576,000 \$630,000 \$670,000 \$697,500 Cost \$516,000 \$538,500 \$563,500 \$591,000 \$621,000

7: The table shows output and cost data. Calculate the average total cost, average fixed cost, average variable cost, and marginal cost reschedules. If the market price were \$500, should the firm shut down in short-run? In the long run?

 Quantity 0 5 10 15 20 25 30 35 TC \$20,000 \$20,500 \$20,975 \$21,425 \$21,850 \$22,300 \$22,775 \$23,275

8: Why would a for-profit organization that incurs losses chose to operate?

9: Why would a for-profit organization that is earning profits choose to exit a lion of business?

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