CS-54 Finance & Accounting On Computers Jan-2001
Q.2. A medical advisory service offers to its subscribers complete information on doctors, paramedical, health insurance, super speciality hospitals and genera! health awareness. It now plan to computerise these services and has a choice of two systems on which to offer these services. Under option A, a computer system would be leased for Rs. 50 lakhs per year and the subscriber requests would be processed with a variable cost of Rs. 20 per request. Under plan B, another system could be leased for Rs. 10 lakhs per plan but processing costs are Rs. 120 per request.
Under either option, the subscriber can and is happy to pay Rs. 220 per request that is processed. On the basis of the above data ;
(i) Which option is more risky?
(ii) Draw break-even charts for both cases.
(iii) At what volume of business would the operating profit under either option the same?
(iv) Which plan has a higher degree of operating leverage?

