Question: A clinic has the fixed and variable costs shown below. A health maintenance organization offers to send 500 patients per year but only offers to pay $300 for each one. Should the clinic agree to this arrangement? It currently has 2,500 patients per year and can easily handle 3,000.

Variable Cost Per Patient       Fixed Costs Per Year

Personnel                                    $150

Rent                                         $100,000

Supplies                                        20

Administrative                             120,000

Laundry                                        30

Other                                         80,000

Other                                           50