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Unformatted text preview: Price = cost * [1/(1-Profit margin)] Price = cost * markup Markup = [1/(1-Profit margin)] 7. Integrated Health Associates (IHA) has the following cost structure: Variable cost per visit $20 Fixed costs $120,000 per year Number of visits per year 4,000 For parts (a) and (b), assume IHA is a price setter. a. What is the minimum price per visit IHA should set using marginal cost pricing? b. Assume IHA sets a price of $50 per visit. Does this reflect a marginal cost pricing strategy or a full cost pricing strategy? How do you know? c. Now assume the market price per visit is $45 and IHA is a price taker. What target average cost per visit must IHA achieve to earn a profit of $50,000? Is the target cost higher or lower than their current average cost per visit? Problem set 8 may be completed in EXCEL or by hand. It is due by 2 p.m. on Tuesday, December 1st....
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- Spring '10