Extra Practice Solution

a)
ETI_rap = AvgPatients x AvgCost_classA
ETI_rap = 5 x (5000.5 + 2,0000.25 + 10,000*0.25)
ETI_rap = 5 x (250 + 250 + 2,500)
ETI_rap = 5 x 3,000 = $15,000

ATLE_rap = Freq_rap * ETI_rap
ATLE_rap = (10 * 12) * ($15,000)
ATLE_rap = 120 * 15,000 = $1.8M
(caps out at 1.5M)
ATLE_rap = $1.5M

ETI_msg = 125 * (0.2 * 50,000 + 0.8 * 10,000)
ETI_msg = 125 * 18,000 = $2.25M

ATLE_msg = Freq_msg * ETI_msg
ATLE_msg = ((1/8) * 12) * 2.25M
ATLE_msg = (3/2) *2.25M = $3.375M
(caps out at 2.5M)
ATLE_msg = $2.5M

b) - d)

Note: option the first option should be 6.25M - there is a small math error there.