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In-House Services decisions without using net present value

SKF Primary Care Clinic is deciding whether to purchase MRI equipment that would enable it to perform MRI imaging services in-house rather than sending its patients to its competitor's hospital three miles away. From a financial position, if SKF were to make its decision without using net present value analysis, the clinic would need to know (or at least reasonably estimate) which of the following information?

A. unavoidable fixed cost, volume, variable cost and indirect costs
B. variable costs, volume, avoidable fixed cost and total revenue
C. total unit cost, indirect costs, profit and volume
D. revenue per unit, indirect costs, volume and total revenue
E. avoidable fixed costs, revenue per unit, volume and contribution margin

Solution Preview

You are correct. Most often, management would use NPV analysis combined with other analyses to determine if the in-house services provided would be an advantage to the ...

Solution Summary

This solution provides the correct answer with explanation to the net present value analysis question listed, regarding SKF Primary Care Clinic. The answer is thoroughly discussed.