Assignment
The Brookline Senior Adult Program (BSAP) is a not-for-profit organization.
It is interested in starting a visiting nurse program for seniors for both those who can pay fully and for those who cannot pay at all. It wants to develop a program that will use nurses to make home visits once a week, beginning with seniors who can pay fully. If the visiting nurse program is successful and profitable, then the program will be expanded to seniors who are unable to pay for it during the second year of operations.
The executive director of BSAP is not sure how best to implement the program.
She has two alternatives in terms of personnel:
? Contract with several nurses who would work part-time
? Hire a small number of nurses as full-time employees
The executive director makes the following assumptions about the new visiting nurse program:
? Although demand is uncertain it is expected to be for 310 one-hour nurse-visits a month from full-pay clients. BSAP recognizes that it may not be able to fulfill all the demand.
? The price for full-pay clients will be set at $80 per visit.
? If the nurses are part-time nurses, BSAP will pay them $64/hour to cover labor and the cost of nursing supplies.
? If BSAP hires full-time nurses, the monthly salary for each nurse would be $5,000, and the agency expects to spend an additional $15/visit for nursing supplies.
? A full-time nurse can make a maximum of 120 one-hour visits per month.
? In addition to nursing costs, BSAP will incur an additional $4,000/month in fixed overhead costs (rent and management salaries) if the visiting nurse program is put into place. At this level of cost, BSAP could provide management support for up to 500 monthly visits.
1. What is the breakeven level of nurse visits per month if BSAP hired only one full-time nurse?
The executive director is considering three delivery models:
A: The service is contracted to part-time nurses
B: Two full-time nurses are hired
C: Three full-time nurses are hired
2. For each of the three delivery models, compute:
? Maximum monthly visit capacity (if applicable)
? Contribution margin per nurse visit
? Total contribution margin per month
? Total profits per month
? Breakeven number of nurse visits per month
You should assume that monthly demand is 310 visits. Also, in Year 1 no supplementary part-time nurses would be hired under models B and C. Finally, any profits earned in Year 1 would be used to purchase office equipment.
3. If BSAP chose option B for year 2, it could forgo potential profits and instead use those resources to hire additional (part-time nurses) to provide services to non-paying seniors. How many visits to non-paying seniors could be made per month by nurses without making a loss under model B?