tIE following cost ril structure Fixed costs $500,000 Variable cost per procedur

Question

tIE following cost ril structure Fixed costs $500,000 Variable cost per procedure 25 100 Charge (revenue) per procedure Gurthermore, assume that the group expects to perform 7,500 proce- dures in the coming year Construct the group's base case projected P&L; statement. point pretax profit of $200,000 a. b. What is the group's contribution margin? What is its breakeven c. What volume is required to provide a pretax profit of $100,0002 A d. Sketch out a CVP analysis graph depicting the base case situation. e. Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Redo questions a, b, c, and d under these conditions. for nrofit acute care facility, has the following

Explanation / Answer

Projected P&L Statement

revenue from operation (charge) 100*7500 $750000

less variable cost 7500*25 $187500

contribution margin $562500

less fixed cost $500000

profit $62500

b) contribution margin = $562500

break even point = fixed cost /contribution margin per unit

= $500000/100-25 =6667 units

c) required profit = $100000

calculation of volume.lets the volume be x

100000 = 100-25) x - 500000

600000/75 = x = 8000

when required profit = $200000

then volume be x

200000 = 75 x - 500000

x = 9333

e) when 20% discount is given

revenue 80*7500 $600000

less variable cost 25*7500 $187500

contribution margin 412500

less fixed cost $500000

profit (87500)

b) contribution margin = $ 412500

break even point = 500000/55 = 9090

c) when required profit is $100000

let volume be x

100000 = (80-25) x - 500000

x= 10909

when required profit is $200000

200000 = (80-25)x - 500000

x = 12727 units

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