Problem:
The Midtown Women's Center offers bone densitometry scans in the office as a convenience to its patients. The clinic volume is expanding, and Sam Loch, the center's administrator, is considering dropping the bone densitometry service and converting the space to an exam room to allow for more outpatient visits. The following information has been gathered to help with the decision.
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Number of scans per year
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425
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Reimbursement for bone densitometry scan
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$65
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Bone densitometry supply cost per scan
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$15
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Part-time bone densitometry scan technician
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$15,000
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Reimbursement per office visit
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$80
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Supply cost per office visit
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$20
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Expected increase in outpatient volume if additional
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500
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exam space is available
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a. What is the contribution margin for the bone densitometry service per year?
b. Should this service continue as opposed to converting it to exam room space? Why or why not?
c. How many office visits would it take to replace the income from the bone densitometry service?