Assignment
Kelly is the proprietor and lead therapist for a Rehabilitation Center. She is currently facing overhead expenses for a building lease ($800 monthly), handicap accessible van ($525 month lease) and her own salary of $75,000 a year (paid out in 12 equal monthly payments).
In addition, she also incurs the following costs dependent on the patient hours logged. Utilities of $10.00 per patient hour, Medical equipment rentals of $75.00 per patient hour, Insurance obligations of $1.25 per patient hour, and the hourly wages for her two Physical Therapist Assistants of $19.00 and $22.00 per patient hour, respectively.
At the moment her facility is accommodating 15 patients. Patients each require a one hour session per day, for 5 days a week over an average of six months (26 weeks). Insurance mandates that Kelly charge patients on an hourly basis, for which she charges $195.00 per hour.
What is Kelly's six month Accounting Profit?
The State of Illinois has recently passed legislation that reconfigures the requirements for collecting Insurance payments. Facilities can only accommodate 12 patients at a time if they stay with the old requirements. They now have the option of becoming certified with the National Rehabilitation Society. Becoming NRS certified will allow therapists to legally increase their patient load to 20. A membership fee cost $25,000 per year (divided into 2 payments over the year), plus additional fees of $3.50 per patient hour.
What will Kelly's six month Economic Profit be when the legislation takes effect? Assuming she has not joined NRS yet, she must abide by the new parameters. The Opportunity Cost will be joining NRS and obtaining the maximum number of patients permitted.
If Kelly feels that she cannot acquire more than 15 patients at a time should she become certified with NRS? Explain and justify your answer with an Economic Profit.