2 )Med-First is a medical facility that offers outpatient medical services. The

Question

2 )Med-First is a medical facility that offers outpatient medical services. The facility is considering offering an additional service, mammography screening tests, on-site. The facility estimates the annual fixed cost of the equipment and skills necessary for the service to be $117,000. Variable costs for each patient processed are estimated at $36 per patient.

2.1 If the clinic plans to charge $57 for each screening test, how many patients must it process a year in order to break even?  patients

2.2 Med-First estimates that the maximum number of patients it could serve in a year is 6400. What is the contribution to profit at this number of patients? $

Explanation / Answer

Ans:

2)

2.1)

Contribution per patient = selling price - variable cost

= $57 - $36

= $21 per patient

Break even point (no of patients) = fixed cost / Contribution per patient

= $117,000 / $21

= 5572 patients

2.2)

Calculation of profit when number of patients are 6400.

Sales(6400 * $57) $364,800 Less: Variable cost(6400 * $36) ($230,400) Contribution $134,400 Less: Fixed cost $117,000 Profit $17400

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