1 you are a radiologist trying to decide whether or not to buy an open
1. You are a radiologist trying to decide whether or not to buy an open MRI
machine. The machine costs $2.6 million. You believe you can charge a premium for
an open MRI and can realistically get $1,500 per scan. The cost of labor for your
tech is about $150 per scan, as well as the value of your own time, which you put at
a. What is the break-even quantity of scans to pay for the MRI machine?
b. A few months after you purchase the machine, you realize that the revenue model
is more complex. Although your costs estimates were correct, your revenue comes
at three different levels: you get $1,500 per scan for privately insured patients;
$1,100 for Medicare patients; and $650 for Medicaid patients. The breakdown of
your patient group is about 55 percent privately insured; 30 percent Medicare; and
15 percent Medicaid. Now, what is the break even quantity?
c. At the end of the year, you realize that you made less money than you thought you
would. Your office wound up performing 3,000 scans. But the electrical bill was sky
high, and your liability coverage went up when you bought the scanner. The electric
bill averaged $8,000 per month more than before you bought the machine, and your
annual liability coverage went up by $30,000. Given this, do you revise your
estimate on the break-even quantity to cover the scanner? How long will it take for
you to recover your investment?
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