Dr. Jones is interested in expanding his practice by adding a piece of radiology equipment. The basic cost of the equipment would be $79,000 for the first year. The monthly loan cost for this equipment is $1,564.29 for five years. Additionally, Dr. Jones must factor in the cost to hire a radiology tech with a predicted $39,600 annual salary (this includes all taxes and fringe benefits). The office already has a radiology room, so there are no fixed costs associated with this purchase.

Complete the table below:
Annual Cost

Maintenance -

Salary 39,600.00

Fixed Costs -

Variable Costs 3,564.00

Total Costs

Reimbursement 56,793.00

Profit or Loss

Determine whether this was a good purchase and explain why or why not.
Type answer here:

Instructions for Question 2 10 Points

2 Dr. Jones’ office has purchased the above equipment. It is now Year #2 and there is a $7,000 annual maintenance fee that needs to be added to the costs of the equipment. The variable cost is now $3.37 per study, but Dr. Jones’ office is planning on doing 1675 studies because there has been an addition of two new managed contracts, and there has been a reimbursement increase to $53.16.

Complete the table below and determine if this was a profit or loss this year?

Year 2
Annual Cost

Maintenance 7,000.00

Salary 39,600.00

Fixed Costs -

Variable Costs 5,644.75

Total Costs

Reimbursement 89,043.00

Profit or Loss

Looking at the two years together (Year 1 and Year 2), was this a good purchase? Briefly explain why or why not.
Type answer here:

Instructions for Question 3 16 Points

3 Using the information below, calculate the standard pro forma sheet for years #3 and #4. The changes to be considered in your calculations include the following:

Year #3 Variable Costs $3.43
Salary $40,500
# of Estimated Studies 1750
Reimbursement $54.26
Year #4 Variable Costs $3.68
Salary $40,500
# of Estimated Studies 1800
Reimbursement $54.99

Year 3 Year 4
Annual Cost 88,915.00 type answer here

Maintenance 7,000.00 7,000.00

Salary 40,500.00 40,500.00

Fixed Costs - -

Variable Costs 6,002.50 6,624.00

Total Costs 72,273.98 72,895.48

Reimbursement 94,955.00 98,982.00

Profit or Loss 22,681.02 26,086.52