Paper Example on Cost-Benefit Analysis of MRI Machine Purchase for Clinic

Introduction

As highlighted in the summary above, the costs and benefits analysis shows the advantages and disadvantages of undertaking a project. The total costs of undertaking the project are high at the beginning but the costs reduce from the second year. The high costs of the purchase and maintenance will be covered by the increased benefits of having the MRI machine in place. One of the benefits expected from the purchase is that it will give the clinic a good reputation and this will eventually attract a large number of patients from around it and increase the revenue received. The additional revenue will be used to train the employees and hire new ones where necessary. One of the main strategies of each organization is to invest in a project that increases the amount of revenue collected. The purchase of the MRI machine is one of the ways in which this goal can be achieved.

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The other common costs are the purchase of needles and other accessories associated with the use of the new machine. The costs are recurrent and can be reduced if the management has a good supplier. An arrangement with a reliable supplier will reduce the replacement costs because the accessories will be durable. Such an arrangement is within the strategic planning of the organization because it is a form of cost-cutting. Cost leadership is one of the most effective strategic plans used by organizations in healthcare to remain competitive and to reduce their expenses. The other consideration is that the building and maintaining the infrastructure related to the MRI machine. According to Moretti, Cantisani, and Di Mascio (2016), maintenance of any capital investment helps to reduce its wearing out and eventually reduces the need to replace the machines. Therefore, the costs and benefits of the MRI machine are within the strategic planning of the clinic because it reduces costs in the long run.

Opportunity Cost and its Impacts on the Profit Margin

The concept of opportunity costs is used to compare the benefits of undertaking ion project over the other. It helps the organizations to determine the benefits lost when one project is chosen instead of choosing the next best alternative (Newman, 2017). For example, when money is spent to purchase and maintain the MRI machine, the money cannot be used to carry out another project. If the next best alternative project is purchasing an x-ray machine or a CT scan machine, the benefits that the clinic could have received from that alternative is the value of the opportunity cost in this project. The most important benefit of using opportunity cost is that it helps the organization in making the right decisions. For example, the management of the clinic can compare the opportunity costs of purchasing the MRI machine with the benefits of purchasing another machine.

The use of opportunity costs concept affects the profit margin in several ways; the first one is that it helps the organization to choose the projects that have the highest returns and disregard the ones that are of a lower value. In this manner, the organization can increase the profits made over time. It also helps the management to weight between the marginal costs and the benefits of the projects. In the excel sheet, the analysis shows the extra costs expected and this is used to increase the profitability of the projects. It can also be used to reduce the operational expenses by choosing the projects with low costs over the ones with high expenses.

Cost-Benefit-Analysis and Organizational and Industrial Needs and Growth

The analysis above is useful in making strategies that support the growth of the organization and meeting the needs of the consumers. One of the ways in which it helps growth is increasing the efficiency and effectiveness of the processes undertaken in the clinic. In the analysis of the benefits of undertaking the proposed project, the first benefit is increased customer satisfaction and this means that the concept helps the clinic grow. It also makes it possible to make decisions that increase the growth of the organization. One of the needs of the industry is to increase the efficiency and effectiveness of the clinical operations and this means it is within the needs of the organization.

The cost-benefit-analysis also increases the chances of achieving the goals of the organization by reducing the errors and improving the services delivery. The decision to implement the most profitable project makes it easy to meet the needs of the clients, increase the number of patients and increase the revenue collected. Most of the organization rely on the decisions of the top management in implementing major projects and this is one of the tools that can help them improve their accuracy in the decision-making process. It also makes it easy to choose the projects that are in line with the trends in the industry, which includes the current changes in technology. The above analysis is useful for the management to evaluate the abilities of the clinic because it includes the costs.

References

Dhar, R. L. (2015). Service quality and the training of employees: The mediating role of organizational commitment. Tourism Management, 46, 419-430. Retrieved from https://www.sciencedirect.com/science/article/pii/S0261517714001538

Moretti, L., Cantisani, G., & Di Mascio, P. (2016). Management of road tunnels: Construction, maintenance and lighting costs. Tunneling and Underground Space Technology, 51, 84-89. Retrieved from https://www.sciencedirect.com/science/article/pii/S0886779815301905

Newman, J. (2017). Contemporary debates on opportunity cost theory and pedagogy. The Economic Theory of Costs(pp. 11-26). Routledge. Retrieved from https://www.taylorfrancis.com/books/e/9781317207641/chapters/10.4324/9781315617336-2

Zwick, T. (2015). Training older employees: what is effective?. International Journal of Manpower, 36(2), 136-150. Retrieved from https://www.emeraldinsight.com/doi/abs/10.1108/IJM-09-2012-0138