assume the managers of fort Winston hospital are setting a price on a new outpat
ID: 2651412 • Letter: A
Question
assume the managers of fort Winston hospital are setting a price on a new outpatient service. here are the relevant data estimates: variable cost per visit $5.00, annual direct fixed costs $500,000, annual overhead allocation $50.000, expected annual utilization 10,000 visits. a) what per visit price must be set for the service to break even? to earn an annual profits of 100,000? part d). repeat part a assuming both a $10 variable cost and 1,000,000 in direct fixed costs. assume the managers of fort Winston hospital are setting a price on a new outpatient service. here are the relevant data estimates: variable cost per visit $5.00, annual direct fixed costs $500,000, annual overhead allocation $50.000, expected annual utilization 10,000 visits. a) what per visit price must be set for the service to break even? to earn an annual profits of 100,000? part d). repeat part a assuming both a $10 variable cost and 1,000,000 in direct fixed costs. assume the managers of fort Winston hospital are setting a price on a new outpatient service. here are the relevant data estimates: variable cost per visit $5.00, annual direct fixed costs $500,000, annual overhead allocation $50.000, expected annual utilization 10,000 visits. a) what per visit price must be set for the service to break even? to earn an annual profits of 100,000? part d). repeat part a assuming both a $10 variable cost and 1,000,000 in direct fixed costs.Explanation / Answer
Answer:-
[ Part-A ]
Variable Cost (VC) = $5
Fixed Cost (FC) = $500000
Annual Overhead Allocation Cost (FC) = $50000
Expected Annual Utilization (Quantity) = 10000
Let Selling Price (SP) = x
(SP * Quantity) - (VC * Quantity) - FC = 0
(x * 10000) - (5 * 10000) - 500000 - 50000 = 0
(10000 x) - (50000) - 500000 - 50000 = 0
10000 x = 600000
x = 600000 / 10000
x = 60
Selling Price = $60
If Annual Profit = $100000
(SP * Quantity) - (VC * Quantity) - FC = Profit
(x * 10000) - (5 * 10000) - 500000 - 50000 = 100000
(10000 x) - (50000) - 500000 - 50000 = 100000
10000 x = 100000 + 600000
x = 700000 / 10000
x = 70
Selling Price = $70
[ Part-D ]
Variable Cost (VC) = $10
Fixed Cost (FC) = $1000000
Annual Overhead Allocation Cost (FC) = $50000
Expected Annual Utilization (Quantity) = 10000
Let Selling Price (SP) = x
(SP * Quantity) - (VC * Quantity) - FC = 0
(x * 10000) - (10 * 10000) - 1000000 - 50000 = 0
(10000 x) - (100000) - 1000000 - 50000 = 0
10000 x = 1150000
x = 1150000 / 10000
x = 115
Selling Price = $115
If Annual Profit = $100000
(SP * Quantity) - (VC * Quantity) - FC = Profit
(x * 10000) - (10 * 10000) - 1000000 - 50000 = 100000
(10000 x) - (100000) - 1000000 - 50000 = 100000
10000 x = 100000 + 1150000
x = 1250000 / 10000
x = 125
Selling Price = $125
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