You work for an eye surgery facility that charges $2000 per operation and averag
ID: 3010545 • Letter: Y
Question
You work for an eye surgery facility that charges $2000 per operation and averages 70 operations a month. The business pays $360,000 annually for its facilities and equipment and pays $540,000 in salaries. Each surgery uses $760 worth of medical supplies and drugs. Each patient gets a bouquet of flowers post-surgery ($30) and a quarter of patients require dark glasses ($40).
Write a short report for the new manager discussing the following:
-your revenue, fixed costs, and variable costs and current profitability
-the number of annual eye surgeries required in order to break even
-a proposed advertising campaign costing $20,000 a month—the ad executives think business would increase by an additional 40 operations a month
-the number of additional operations that would be needed to cover the additional expense (keeping in mind that each operation incurs additional costs)
-the impact on profits if business actually increases by the promised 40 operations a month
-the cost-saving potential of a machine that reduces costs by $100/patient but costs $100,000 annually, with and without the advertising campaign
Explanation / Answer
1 . revenue
2000*70*12 (charge of one operation *number of operation per month *number of monthin a year)
=> 168, 0000 this is the total revenue
fixed cost are cost for salary + cost of equipment =>360,000+540,000 = 900, 000
variable cost are the cost that includes cost of medicine, flowers, pair of glasses
=>672, 000
profitability = revenue - total cost (fixed cost + variable cost)
=>
2000*70*12 (charge of one operation *number of operation per month *number of monthin a year)
=> 168, 0000 this is the total income
expenses = (cost of equipment + cost of salary + 210(which is one quarter of total patient)*760+30+40 +630 *760+30 )
=>672000
hence 168,0000-1572000
=> 10, 8000
the number of annual eye surgeries required in order to break even
total expenses (1572000) = 2000(cost of operation) * total number of operation
total number of operation 1572000/ 2000 = 786 annually
-the number of additional operations that would be needed to cover the additional expense
expenses 1572000 (old expense) + ad cost (240.000)
=> 1812000/2000
=>906 annually
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