On average, clinic patients are expected to contribute $10 per visit, irrespective of location. Annual donations at each location are expected to be $1 million, and are expected to grow 15 percent annually over the next three years. Although most clinical services are provided by volunteers, the free clinic will have a salaried executive director, volunteer coordinator, two full-time clinicians, and two part-time clinicians, for a total annual cost of $275,000. Fixed costs, not including salaries, at Cherry Hill are expected to be $340,000; fixed costs at Eastgate are expected to be $410,000; and fixed costs for Kenwood are expected to be $378,000. Average variable costs per visit are expected to be $20 at Cherry Hill, $27 at Eastgate, and $24 at the Kenwood location. Expected annual patient visits at the Cherry Hill location are 6,180; expected annual visits at Eastgate are 5,925; and expected annual visits at Kenwood are 6,220.
a. Which location should be chosen based on total costs in year 1 of operations?
b. Which location should be chosen based on total profits in year 1 of operations?
