MAT217: Chapter 1 Project

You have been hired as a consultant for Southwest Hospital to evaluate some of their business operations. The hospital board has provided the following information to help you in your evaluation:

Southwest Hospital has an operating room used only for eye surgery. The annual cost of rent, heat, and electricity for the operating room and its equipment is $340,000. The annual salaries of the people who staff this room total $560,000.

Each surgery performed requires the use of $760 worth of medical supplies and drugs. To promote goodwill, every patient receives a bouquet of flowers the day after surgery. In addition, one-quarter of the patients require dark glasses, which the hospital provides free of charge. It costs the hospital $30 for each bouquet and $40 for each pair of glasses.

The hospital receives a payment of $2,000 for each eye operation performed. The hospital currently averages 70 eye operations per month.

1) One of the nurses informed the board that she has recently learned about a machine that would reduce the per patient amount of medical supplies needed for each operation by $108. The machine can be leased annually for $100,000.

2) An advertising agency has proposed to the hospital board that the board should spend $20,000 per month on television and radio advertising to persuade people that Southwest Hospital is the best place to have any eye surgery performed. Advertising account executives estimate that such publicity would increase business by 40 operations per month.

The board of Southwest Hospital has requested you prepare a brief report for them addressing the following:

- Summarize the overall problem.

- Create both cost and revenue functions by identifying revenue per case and annual fixed and variable costs for running the eye surgery operating room as it currently operates (i.e. without considering the new machine or the advertising).

- Based on current operations, determine how many eye operations the hospital must perform each year in order to break even
**with the new machine**. How does this compare to current operations at Southwest Hospital**(without new machine)**?

- Based on your own financial calculations (and not considering the advertising campaign), advise the hospital on whether it should lease the machine the nurse has brought to the attention of the board. Make sure to provide a detailed accounting of the calculations you use for your recommendation for the board's review.

- Evaluate the impact of the advertising campaign (
**without machine**) on the hospital's profits. In your evaluation consider the following:

- If the advertising agency is correct and assuming the increase does
__not__affect fixed costs related to salary and rent/heat/electricity, what impact would the advertising have on the hospital's profits?

- In case the advertising agency is being overly optimistic, how many extra operations per month are needed to cover the added cost resulting from the advertising campaign?

- Evaluate the impact of approving both the advertising campaign and the machine on the hospital's profits, assuming the ad campaign does meet its projections.

Make sure to ** explain** your approach using complete sentences as well as showing and explaining all variables, equations, and calculations you use in your analysis. Show all math steps clearly and make sure to completely address all of the board's requests.

__Project Details & Guidelines__

This project is worth 100 points.

Please keep in mind…

- You may use technology (i.e. a graphing calculator or a computer) to help you solve this problem, but you must show and explain how you set up the problem and how you used technology to help you solve the problem.

- All written answers and explanations should be in
.__complete sentences__

- You must type the assignment, but you may handwrite in formulas, equations or mathematical symbols that are not easily typed and remember you will be graded on neatness and the professional appearance of your final product as well as the accuracy of your answer!

Subject | Mathematics |

Due By (Pacific Time) | 09/09/2015 08:51 pm |

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