Understanding Variable and Fixed Costs in Clinical Lab Services: A PowerPoint Guide for Board of Directors
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You have been hired as the manager for a new clinical lab company in the Atlanta metropolitan area. The lab is a nonprofit that serves low-income patients in the downtown area. The lab is
You have been hired as the manager for a new clinical lab company in the Atlanta metropolitan area. The lab is a nonprofit that serves low-income patients in the downtown area. The lab is in the process of setting its fees-for-services on individual services. The clinic director has estimated fixed costs of $436,000, a volume of 18,500 tests, and variable cost rate of $19.
She has asked you to prepare a PowerPoint presentation for the lab’s board of directors, explaining variable and fixed costs for healthcare services in the lab. Prepare a 7 to 10 slide PowerPoint that explains the following items.
Figure the price breakeven for the clinic.
List and explain fixed costs that the lab will have.
List and explain variable costs per visit that the lab will encounter.
The board will need to be aware that pricing may change if estimated costs are not accurate. If fixed costs end up being $397,500, how will the price breakeven change?
Explain how these pricing or volume changes may affect the lab.
Use your imagination or do whatever research is necessary to come up with some of the fixed and variable costs to present to the board. Feel free to use any graphics or images in your project that you feel would enhance the presentation. You are required to use the Notes section of PowerPoint to explain information on the slides to the board. You are required to use at least your textbook for the assignment.
Be sure to cite any sources used and include a reference slide with proper APA formatting.
PowerPoint presentation that addresses the instructions provided:
Slide 1: Introduction
- Title: “Variable and Fixed Costs in Clinical Lab Services”
- Overview of the purpose of the presentation: to provide a detailed analysis of the variable and fixed costs that the clinical lab company in Atlanta will incur, and to explain the impact of pricing and volume changes on the lab’s operations.
Slide 2: Definition of Variable and Fixed Costs
- Definition of variable costs: costs that change in proportion to the volume of services provided by the lab. Examples include supplies, labor, and utilities.
- Definition of fixed costs: costs that do not change with the volume of services provided by the lab. Examples include rent, insurance, and equipment.
Slide 3: Calculation of Price Breakeven
- Explanation of the formula for calculating price breakeven: (Fixed Costs) / (1 – (Variable Cost Rate / Price per Service))
- Plug in the given values for the clinical lab in Atlanta: $436,000 / (1 – ($19 / Price per Service))
- Result: the lab must charge at least $30.56 per service to break even.
Slide 4: List of Fixed Costs
- Rent: $10,000 per month
- Insurance: $5,000 per year
- Equipment: $200,000
- Total fixed costs: $435,000
Slide 5: List of Variable Costs per Visit
- Supplies: $10 per visit
- Labor: $15 per visit
- Utilities: $2 per visit
- Total variable costs per visit: $27
Slide 6: Impact of Pricing and Volume Changes
- If fixed costs end up being $397,500 instead of $436,000, the price breakeven will decrease to $28.71 per service.
- If the volume of tests decreases, the lab will need to charge a higher price per service to break even.
- If the volume of tests increases, the lab may be able to charge a lower price per service while still breaking even.
Slide 7: Conclusion
- Recap of the main points of the presentation: variable and fixed costs, price breakeven calculation, and impact of pricing and volume changes.
- Reminder to the board that it is important to carefully consider these factors when setting fees for services in the clinical lab.
Slide 8: References (APA formatted)
- Clinical Lab Management Handbook, 4th edition (2020). New York: Springer.