Problem:
ABC Medical Center has cardiology equipment with fixed depreciation costs of $150,000 per year. Variable costs per patient are $200. Using this information, calculate the following:
(a) Full and average cost at patient volume levels of 100, 500 and 1500.
(b) Blue Cross wishes to contract for 500 procedures at a price of $350 each.
Required:
Question: Assuming fixed costs have been covered, and capacity exists, calculate the incremental profit for 700 additional patients.
Note: Please provide reasons to support your answer.