A general practitioner's office takes roughly 20 minutes to process a patient from start to finish. Medical supplies and general overhead per visitor is $6, the receptionist earns $15/hour and the doctor's salary is a flat $100,000 /year. The office is owned with no mortgage. Currently the doctor sees about 15,000 patients a year. Assume the patient base is incapable of rising. Assume the receptionist is sent home if there is no work. What is the incremental cost of a visit? What is the average cost?
Total cost for 15000 patients
Doctor salary - $100,000
Medical supplies and general overhead - 6 x 15000 = $90,000
Number of hours the receptionist is employed ( in hours ) - 15000 x 20 / 60 = 5,000 ( since each patient takes 20 minutes to be processed )
Cost of receptionist = 15 x 5,000 - $75,000
Total cost = 100,000 + 90,000 + 75,000 = $265,000
Incremental cost is the cost of treating one additional patient.
One additional patient would need medical supplies and general overhead and the receptionist needs to stay for 20 additional minutes.
Therefore, the incremental cost = 6 + (20/60)*15 = 6 + 5 = $11
Average cost = Total cost / number of patients = 265,000 / 15000 = $17.67
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