Case 10

Topics: Costs, Economics, Cost Pages: 4 (1246 words) Published: June 28, 2013
Case Study # 10 Denver Health Network: ABC Analysis
1.Estimate the base (initial) cost of each alternative. Here, you just need to put in the appropriate RED input from the information in the case study. The answers will be spit out. Which alternative has the lower total cost? Why? Alternative 2 has the lowest total per a procedure cost. Operating costs of Alternative 1 is $86.15, which is lower than Alternative 2 of $92.15Alternative 2 is higher in operation al cost because there is six dollars in extra costs assessed with travel and set up costs. When the other costs, which include capital and maintance, are incorporated, Alternative 2 becomes the lower cost with an annual cost of$ 251,160 and Alternative 1 is $ 268,260. Alternative 2 has the total lower cost because there are more capital costs in Alternative 1, as there is an initial purchase of 3 machines instead of 1 machine. 2.. Given the results represented by these two worksheets, which is the lower cost alternative? Do you notice anything about the increasing costs of the alternatives that you find interesting or noteworthy? Alternative two remains the lowest cost with both a 20 % and 10 % increase. With each percent increase the total cost of procedure is approximently 2 dollars per a procedure with both Alternative 1 and Alternative 2. Even with the increase in transportation and setup costs (Alternative 2) Alternative 1 still remained the higher cost, which could be due to the capital costs still remains higher then Alternative 2. 3.What impact does the discount have on your decision?

The 5.0% discount changed the cost per a procedure in Alternative 1 from $111.78 to $110.53 per a procedure, which is not a significant change in total price per a procedure only approximately a $1.25 difference. •The discount does not impact my decision as the lower cost as Alternative 2 still remains the lower total cost.

4.What happens to the cost of each alternative in the short run? In the...
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