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    Opportunity cost

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    Regarding that question we have been doing:

    It says that expected revenue is going to be $80 or $120 differential a day for the proposed unit....This is incremental revenue I take it. Should I also be including the $120 regular room charge in my calculation?

    The reason I ask is because our lecturer told us we don't need to include irrelevant costs! I included it so that I got an accurate figure for the 10% allowance for bad debts and insurance discount....

    Maybe I should be applying that "bad debts and insurance discount" to the cardiac care room rate also but it does not stipulate that directly?

    And finally, based on the Return on investment percentage and the differential margins, what would your recommendation be based on financials and based on qualitative information?

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    Surely the $120 regular room charge should be included in calculating the total revenue from the proposed telemetry unit. Because this is the basic income from the project, which varies with the utilization rate.
    <br>Irrelevant costs should be taken away of course. But those items stated in the question ...