Paste Format BI U 1 CHAPTER 7:SERVICE LINE COSTING AND PRICING 2 Homework 3.1, C
ID: 2330840 • Letter: P
Question
Paste Format BI U 1 CHAPTER 7:SERVICE LINE COSTING AND PRICING 2 Homework 3.1, Chapter 7 4 a. Your hospital is considering offering a new outpatient service. Using the data 5 below, determine the price needed to breakevn. 7 RELEVANT DATA 8 Variable cost per visit 9 Annual direct fixed costs 10 Annual overhead allocation $8 $650,000 $60,000 15,000 11 Expected utilization (visits) 12 13 14 15 16 17 18 19 21 23 24 b. Assume now that the CEO is requesting to know what price must be set in order 25 to earn a $100,000 profit. What price must be set in order to meet this desired 26 profit level? 27 28 29 30 31 32 34 35 36 37 38 39Explanation / Answer
a) Patient visit breakeven price
Total revenues - Total costs = $0
Total revenues - Total variable costs - Direct Fixed Costs - Overhead
= (15000 * Price) - (15,000 * $8) - $6500,000 - $60,000 = $0
= (15,000 * Price) - $830,000 = $0
= 15,000 * Price = $830,000
Price = $830,000/ 15,000
= $55.33 aproxx
b) Breakeven to make the following profit: $100,000
Visit Total Costs of (15,000 *55.33) = $830,000
Total costs + profit = Total Revenues
830,000+100000 = 930,000
Price = $930,000 / 15,000 visits
= $62 per viist