# Assessment Question 1 (10 marks) Management of the new medical centre wants you to simulate the day appointments schedule for one doctor

Assessment Question
You and a few friends have just graduated from Charles Sturt University and see in the newspaper the opportunity to submit a tender to build 6 new medical centres. The medical centre is a franchisee of Mediocre Medical Centres (MMC). If the tender is successful, part of the job will involve designing a prototype medical centre which will consist of 10 consulting rooms, 2 surgery’s, a community health section, pharmacy and a café. You are required to present your responses as a business report addressed to MMC.

Question 1 (10 marks)
Management of the new medical centre wants you to simulate the day appointments schedule for one doctor. An analysis has been done predicating one week’s operation and has come up with the following results:

Time between arrivals Number of occasions
10 15
15 30
20 25
25 20
30 10

Appointment length Number of occasions
7 40
12 20
15 20
20 10
30 10

Required:
1. What is the probability that the time between arrivals will be 20 minutes or more? (1 mark)
2. What is the probability that the appointment time will be 12 minutes or less? (1 mark)
3. Using Monte Carlo, simulate 10 arrivals and 10 appointments using random numbers: (4 marks)
4. After 5 simulations, what is the total waiting time of patients? (2 marks)
5. What is the total idle time of the doctor at the end of the first hour? (1 mark)
6. What is the largest queue of students that forms? (1 mark)

Question 2 (20 marks)
MMC has just completed a prototype of a medical room and has the following information
Direct construction material \$80,000
Direct labour time for the first unit (hours) 3,000
Learning curve for constructing the room 90%
Labour cost \$25

Required
1. Calculate the total variable costs for producing 2, 4 and 8 rooms (10 marks)
2. Explain what is meant by a ‘learning curve’ and the role learning curves have in cost estimation. (4 marks)
3. How does a learning curve differ from an experience curve? (3 marks)
4. What is an 80% cost experience curve? (3 marks)

Question 3 (30 marks)
The medical centre tender selection panel have provided you with some estimated figures of the number of emergency appointments, patients per day and the associated administrative costs for the first year of operation. Below is the summary of the year’s expected patients. It has been estimated that the clinic’s relevant range is 150 to 300 patients per day.
Month Emergency appointments Patients per day Administrative costs (\$)
January 30 350 2780
February 32 125 1400
March 20 100 1200
April 30 250 2000
May 34 325 2380
June 38 225 1840
July 26 275 2040
August 24 75 820
September 34 175 1880
October 34 300 2220
November 26 150 1660
December 42 375 3220

Required:
1. Draw a scatter diagram of the clinics’ administrative costs and patients per day during its first year of operations. ( 5 marks)
2. Mark the clinics’ relevant range of activity on the scatter diagram (3 marks)
3. Use the high-low method to estimate the behaviour of the clinics’ administrative costs based on patients per day within the relevant range. Use an equation to express the results of this estimation method. (5 marks)
4. What is your prediction of the clinics administrative costs during the month when 200 patients visit? (2 marks)
5. Identify the number of emergency appointments, patient load and administrative costs for each month within the relevant range (5 marks)
6. Construct an excel spreadsheet and create a regression analysis to estimate
1. An equation with patient per day, predicting administrative cost within the relevant range (2 marks)
2. An equation with both activities – patients per day and number of emergency appointments, predicting administrative costs within the relevant range (3 marks)
3. Does the inclusion of an additional cost driver improve the model? Explain your answer (5 marks)

Question 4 (30 marks)
Mediocre Medical Centre would like you to investigate building a florist in the medical centre. There would be 3 products: Roses, Natives and Imported flowers. Based on an analysis from another florist shop, there seems to be considerable variation in sales volume and variable costs. You believe that the forecast should be evaluated from a cost-volume-profit viewpoint. The preliminary budget information is as follows:

Roses Natives Imported
Units sales 50,000 50,000 100,000
Unit selling price \$30 \$45 \$54
Variable cost per unit \$19 \$26 \$34
Variable selling cost per unit \$7 \$10 \$12

For the coming year, fixed manufacturing overhead is budgeted at \$400,000. The company’s fixed selling and administrative costs are forecast to be \$350,000. Mediocre Medical Centre will pay tax at 40%.

Required:
1. Determine MMC budgeted net profit for the coming year (5 marks)
2. Assuming the sales mix remains as budgeted, determine how many units of each product MMC must sell in order to break even in the coming year. (10 marks)
3. After preparing the original estimates, management determines that the variable manufacturing cost of imported flowers would increase by 20% and the variable selling cost of natives could be expected to increase by \$3.00 per units. However, management has decided not to change the selling price of either product. In addition, management have learned that imported flowers are perceived to be the best value for money, and they can expect to sell three times as many imported flowers as each of their other products. Under these circumstances, determine how many units of each product MMC would have to sell in order to break even in the coming year. (10 marks)
4. Write a one-page memo to management, recommending what action they should take, as determined in Parts 2 and 3. Provide justification for your choice. (5 marks)

Question 5 (10 marks)
1. Describe what qualitative forecasting models are. What are the advantages and disadvantages of this modelling? (5 marks)
2. “High correlation between two variables means that one is the cause and the other is the effect”. Explain this statement (5 marks)

Preparation and submission requirements
This assignment requires a Microsoft Word document as well as a Microsoft Excel spreadsheet solution. Both of these must be submitted.
You must submit both a Word file AND an Excel file.
Your spreadsheet solutions must be cut and pasted into the Word document. This Word document is what will be marked and returned to you. Remember that in the business world, the professional presentation of information is fundamental and accordingly, marks will be deducted for poor presentation. An electronic version of your source spreadsheet is required to enable markers to open the file and test your efficient use of spreadsheet formula by, for example, changing the values of input variables. Marks will be awarded on the basis of correctness of answers, appropriate use of spreadsheet modelling, effective worksheet design, and level of professional presentation.