Problem: Walnut Corporation operates a small medical lab in Kansas, one that conducts minor medical procedures (including blood tests and x-rays) for a number of doctors. The lab consumes various medical supplies and is staffed by two technicians, both of whom are paid a monthly salary. In addition, there is an on-site office manager who is also paid by the month.
Required to do:
Question 1: If the lab's patient count increases by, say, 15%, will the lab's total operating costs increase by 15%? Explain.
Question 2: Walnut is considering opening an additional lab in a new suburban medical building. What will likely happen to the lab's level of fixed cost incurrence? Why?
Question 3: What analysis methods would be available to the office manager and/or Walnut management if a close look at the lab's cost behavior is desired?
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