Assume the managers of the Fort Winton Hospital are setting the price on a new outpatient...
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Assume the managers of the Fort Winton Hospital are setting theprice on a new outpatient service. Here are the relevant dataestimates:
Variable cost per visit $5.000
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected Annual utilization 10,000visits
1.What per-visit price must be set for the service tobreak-even? To earn an annual profit of $100,000?
2.Repeat part a, but assume that the variable cost per visit is$10.
3.Return to the data given in the problem. Again, repeat part a,but assume that direct fixed costs are $1,000,000.
4. Repeat part a assuming both a $10 variable cost and$2,000,000 in direct fixed costs
Assume the managers of the Fort Winton Hospital are setting theprice on a new outpatient service. Here are the relevant dataestimates:
Variable cost per visit $5.000
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected Annual utilization 10,000visits
1.What per-visit price must be set for the service tobreak-even? To earn an annual profit of $100,000?
2.Repeat part a, but assume that the variable cost per visit is$10.
3.Return to the data given in the problem. Again, repeat part a,but assume that direct fixed costs are $1,000,000.
4. Repeat part a assuming both a $10 variable cost and$2,000,000 in direct fixed costs
Answer & Explanation Solved by verified expert
a. Let per visit price for the service to break even be x
At break even point ,
Total contribution=Total fixed cost
10,000(x-5) =500,000+50,000
10,000x-50,000=550,000
x=$60
To earn desired profit of $100,000
Total contribution=Total fixed cost + desired profit
10,000(x-5) =500,000+50,000+100,000
x=$70
b)
At break even point ,
Total contribution=Total fixed cost
10,000(x-10) =500,000+50,000
10,000x-100,000=550,000
x=$65
To earn desired profit of $100,000
Total contribution=Total fixed cost + desired profit
10,000(x-10) =500,000+50,000+100,000
x=$75
c)
At break even point ,
Total contribution=Total fixed cost
10,000(x-5) =1,000,000+50,000
10,000x-50,000=1,050,000
x=$110
To earn desired profit of $100,000
Total contribution=Total fixed cost + desired profit
10,000(x-5) =1,000,000+50,000+100,000
x=$120
d)
Total contribution=Total fixed cost
10,000(x-10) =2,000,000+50,000
10,000x-100,000=2,050,000
x=$215
To earn desired profit of $100,000
Total contribution=Total fixed cost + desired profit
10,000(x-10) =2,000,000+50,000+100,000
x=$225
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Assume the managers of the Fort Winton Hospital are setting theprice on a new outpatient service. Here are the relevant dataestimates:Variable cost per visit $5.000Annual direct fixed costs $500,000Annual overhead allocation $50,000Expected Annual utilization 10,000visits 1.What per-visit price must be set for the service tobreak-even? To earn an annual profit of $100,000?2.Repeat part a, but assume that the variable cost per visit is$10.3.Return to the data given in the problem. Again, repeat part a,but assume that direct fixed costs are $1,000,000.4. Repeat part a assuming both a $10 variable cost and$2,000,000 in direct fixed costs
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