Quickcare is a health care franchise. It charges $150 per physical exam. Fixed cost is $50,000 and variable cost is $55 per exam. To improve margin, clinic will increase price to $175. Administration believes this will decrease volume by 33%. Last year 1500 exams were performed. If program closes completely, all $50000 in fixed cost will be saved.
a. What should Quickcare's decision be, assuming that this price increase would decrease the number of patients seen by one-third.
b. What price would QuickCare have to charge to make up for the loss of patients?
c. Using the information in a, should Quickcare make the same decision if 40% of the fixed costs are avoidable. Would it be better or worse off? Why?