kittbishop
Dec 11, 2011, 05:28 PM
For the past three years ABC Hospital has operated the free standing "Community Scan Clinic" [CSC]which provides scans of various types.
For the most recent fiscal year the CSC had revenues of $600,000 but incurred $400,000 of direct costs and $300,000 of ABC Hospital allocated costs. This revenue of $600,000 and costs of $700,000 resulted in a $100,000 loss for what was intended to be a profit center. Using the same type of computation, the CSC lost about $150,000 in each of its first two years of operation.
If we take only a SHORT-TERM perspective and consider only financial reasons, should the clinic be closed to improve ABC Hospital's net income?
For the most recent fiscal year the CSC had revenues of $600,000 but incurred $400,000 of direct costs and $300,000 of ABC Hospital allocated costs. This revenue of $600,000 and costs of $700,000 resulted in a $100,000 loss for what was intended to be a profit center. Using the same type of computation, the CSC lost about $150,000 in each of its first two years of operation.
If we take only a SHORT-TERM perspective and consider only financial reasons, should the clinic be closed to improve ABC Hospital's net income?