The owner believes she can set up different rates for different types of transport. The types of transport are Basic, Intermediate, and Intensive. Below is her estimate of the volume that can be generated annually:
| |
|
Basic
|
Intermed.
|
Intensive
|
Total
|
|
Total Billable miles per ambulance
|
20%
|
50%
|
30%
|
100%
|
|
Ambulance 1
|
60,000
|
12,000
|
30,000
|
18,000
|
60,000
|
|
Ambulance 2
|
40,000
|
8,000
|
20,000
|
12,000
|
40,000
|
|
Total Miles
|
100,000
|
20,000
|
50,000
|
30,000
|
100,000
|
She believes that her staffing and equipment is adequate for the basic cases, but would need to add an EMT for the intermediate type, and an EMT and full time RN for the Intensive transport. Assume the full cost of the EMT is $40,000, and RN is $50,000. Other overhead and fixed costs remain constant.
Questions for Scenario B: (Be sure to answer all questions)
a. Given these assumptions, what is the total cost for each of these three types of transports? What is the basis of allocation of indirect costs and why?
b. Assuming the owner negotiates the following prices, does the she break even? If not, what is the total break even volume with these prices?
a. Basic = $4.75
b. Intermediate $6.50
c. Intensive = $7.75
c. Assuming the owner's assumptions on volume are correct, what price does she need to negotiate to cover costs for each type of transport and make a total $10,000 in profit overall?