When does a new lab break even, and what does a price cut do?
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The prompt
Kaveri Diagnostics (a fictional lab chain in India) opens a central lab in Pune with fixed costs of INR 60 lakh (INR 6,000,000) a month for staff, rent and leased machines. The average patient pays INR 900 for their tests. Reagents, sample collection and transport cost INR 300 per patient. How many patients a month does it need to break even? What is its margin at 14,000 patients a month? A rival cuts prices; if Kaveri cuts its average price by 10 percent, what is its new breakeven?
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