A Doc-in-a-Box office, a group of family practitioners, is looking for a
new location to expand their services. Three locations are identified with
fixed costs. Because of diverse population profiles in these locations,
patient visits, variable costs, and revenues vary in each location as
shown in Table EX 4.2.
Table EX 4.2
A B C
Average Revenue per Patient 60 60 60
Average Variable Cost per Patient 44 47 45
Average Number of Visits 13,500 12,000 11,500
Fixed Costs in $ 120,000 145,000 140,000
a. Determine the location based on total cost.
b. Determine the location based on revenue.
c. Determine the location based on profit.
d. Determine the sensitivity of the decision in part (c) for varying values
of visits. (Hint: Draw a graph of cost, revenue, and profit.)