Question

Seattle Radiology Group plans to invest in a new CT scanner. The group estimates $1,500 net revenue per scan. Preliminary market assessments indicate that demand will be less than 5,000 scans per year. The group is considering a scanner (Scanner A) that would result in total fixed costs of $1,000,000 and would yield a profit of $500,000 per year at a volume of 5,000 scans. What is the implied variable cost rate (variable cost per scan) for Scanner A?

Answer 1

Answer:

Unitary variable cost= $1,200

Variable cost rate= 0.8

Explanation:

First, we need to calculate the total variable cost:

Total variable cost= sales - fixed cost - gross profit

Total variable cost= (5,000*1,500) - 1,000,000 - 500,000

Total variable cost= $6,000,000

Now, the unitary variable cost:

Unitary variable cost= total variable cost / number of units

Unitary variable cost= 6,000,000 / 5,000

Unitary variable cost= $1,200

Variable cost rate= 1,200 / 1,500= 0.8