A doctor's office is considering the purchase of a new piece of equipment. The equipment costs $25,000. The procedure performed with the new equipment will be billed to patients at $200. The doctor's office estimates that the cost of materials and training for the new equipment will be approximately $75 per procedure. For which of the demand value below does it make sense for the purchase?
A) 50 procedures
B) 100 procedures
C) 150 procedures
D) 225 procedures

Question

Quizplus · Accepted Answer

To break even, the revenue from procedures must cover the equipment cost and variable costs. At 225 procedures, revenue ($200 x 225 = $45,000) minus variable costs ($75 x 225 = $16,875) is $28,125, which covers the $25,000 equipment cost.

A Doctor's Office Is Considering the Purchase of a New