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Ahmet Sari recently graduated from medical school. He is considering opening his own practice doctor office. A doctor's office is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many patients are served. Assume the annual fixed cost of operations is S400,000. Further assume that the only significant variable cost relates to patients served. An average patient served costs S250. Ahmet's banker has asked a variety of questions in contemplation of providing a loan for his business.
Problem 1: If the average patient is charged S475 for services, how many patients must be served to clear the break-even point?
Problem 2: If the banker believes Ahmet will only serve 1000 patients during the first year in business, how much will the business lose during its first year of operation?
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