From the income statement provided, is the organization making a profit or loss?
ID: 2328311 • Letter: F
Question
From the income statement provided, is the organization making a profit or loss? How much is that profit or loss? Show work.
What is the contribution margin? Show work.
What is the break even point for this organization? Show work.
MedStar Health, Inc. Consolidated Statements of Operations and Changes in Net Assets For the Three and Six Months Ended December 31, 2017 and 2016 (Dollars in millions) Six Months Ended 2017 Actual Budget Actual Three Months Ended December 31 2016 Actual December 31 2017 2016 2017 Actual 2017 Operating revenues: Net patient service revenue Provision for bad debts S1,242.4 S1.200.6 1,169.5 $2,410.7 $2,398.6 $2,321.3 (55.1) (56.3) (54.) (108.8 Total net patient service revenue, net of provision for bad debts 1,1873 1,1443 1,115.4 2,3019 2,286.3 2,209.9 Premium revenue Other operating revenue 142.7 209.9 202.7 52.6 1,394.2 1,406.8 1,368.8 422.0 399.6 94.7 2,778.2 2,810.4 2,704.2 363.1 113.2 102.1 Net operating revenues Operating expenses Personnel 774.3 748.2 737.8 509.3 1,488.7 1,449.2 385.3 378.2 489.0 455.6 242.4 267.3 255.8 24.9 22.4 96.0 es Purchased Other operating Interest expense Depreciation and amortization 203.3 191.8 188.9 207.9 245.2 231.4 118.6 134.6 134.2 392.7 447.5 services 11.5 125 52.5 22.8 104.9 56.2 Total operating expenses 1388.5 1,352.5 2,719.6 2,766.9 2,657.2 Earnings from operations 26.1 18.3 16.3 58.6 43.5 47.0 Non-operating gains (losses): Investment income Net realized gains on sale of investments Unrealized gains on derivative instruments Unrealized gains (losses) on investments Other 5.8 17.06.3 4.8 4.9 10.4 24.6 9.5 7.3 12.5 21.4 40.2 43.3 4.3 33.8 (3.2) 54.3 10.6 (13.2) 85.8 (6.6) 115.6 Total non-operating gains (losses) 66.3 Excess of revenue over expenses S80.4 S39.9 S18.4 $174.2 S86.8 $113.3Explanation / Answer
Requirement 1 Organization is making profit, which can be evidenced from following calculations 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Net Operating Revenue A 1394.20 1406.80 1368.80 2778.20 2810.40 2704.20 Less : Operating Expenses B 1368.10 1388.50 1352.50 2719.60 2766.90 2657.20 Operating profit A-B 26.10 18.30 16.30 58.60 43.50 47.00 Requirement 2 The contribution margin is as follows 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Net Operating Revenue A 1394.20 1406.80 1368.80 2778.20 2810.40 2704.20 Less : Variable Expenses Personnel 774.30 748.20 737.80 1509.30 1488.70 1449.20 Supplies 203.30 191.80 188.90 392.70 385.30 378.20 Purchased Services 207.90 245.20 231.40 447.50 489.00 455.60 Other operating 118.60 134.60 134.20 242.40 267.30 255.80 Total variable expenses 1304.10 1319.80 1292.30 2591.90 2630.30 2538.80 Contribution Margin B 90.10 87.00 76.50 186.30 180.10 165.40 Requirement 3 The breakeven analysis is as follows 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Contribution Margin Ratio A 6.46 6.18 5.59 6.71 6.41 6.12 (B/A% in Requirement 2) Fixed Operating Expenses Interest Expenses 11.50 12.50 11.10 22.80 24.90 22.40 Depreciation and amortization 52.50 56.20 49.10 104.90 111.70 96.00 Total Fixed Operating Expenses B 64.00 68.70 60.20 127.70 136.60 118.40 Break Even sales in dollars B/A% 990.3307 1110.887 1077.147 1904.327 2131.597 1935.776 Note : It is assumed that Personnel and other operating expenses are variable in nature. However, if we assume anyone or both of them to be fixed, our answer will be differenet in requirement 2 & 3 If you find this answer helpful, please do rate it. Thank You
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