63/64 Assume that Targhee Sports Medicine Center has the following cost structur

ID: 2754086 • Letter: 6

Question

63/64 Assume that Targhee Sports Medicine Center has the following cost structure:

Fixed Costs

$200,000

Variable Cost Per Procedure

$45

Charge Per Procedure

$100

Estimated Number of Procedures

5000

Construct the Center’s base case projected Profit & Loss Statement.

Please answer all parts of the Question:

A What is the Center’s per unit contribution margin?

B What is the Center’s volume (accounting) breakeven?

C What volume (economic breakeven) is required to obtain a profit of $50,000?

63/64 Assume that Targhee Sports Medicine Center has the following cost structure:

Fixed Costs

$200,000

Variable Cost Per Procedure

$45

Charge Per Procedure

$100

Estimated Number of Procedures

5000

Construct the Center’s base case projected Profit & Loss Statement.

Please answer all parts of the Question:

A What is the Center’s per unit contribution margin?

B What is the Center’s volume (accounting) breakeven?

C What volume (economic breakeven) is required to obtain a profit of $50,000?

A. Per unit Contribution margin = Selling Price - Variable cost = 100 - 45 = $55 per procedure

B. Breakeven:
At breakeven the total profit/loss equals 0. Let breakeven volume be x.

Then Profit/Loss = x * 55 - 200000 = 0

x = 200000/55 = 3636.36 ~3636 procedures

C. Let the volume to get a profit of 50000 be y.

Profit = y*55 - 200000

Thus, 55y - 200000 = 50000
y = 250000/55 = 4545.45 ~ 4545 units

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.