Can you please show me step-by-step for this? Assume that managers of QVC Hospit
ID: 2777672 • Letter: C
Question
Can you please show me step-by-step for this?
Assume that managers of QVC Hospital are setting the price on a new outpatient service. Here are relevant data estimates:
Variable cost per visit $25.00
Annual Direct Fixed Costs $750,000
Annual Overhead Allocation $275,000
Expected Annual Utilization 20,000 visits
What per visit price must be set for the service to breakeven? To earn an annual profit of $100,000?
Repeat Part a, but assume that the variable cost per visit is $27.
Return to the original data given in the problem. Again repeat Part a, but assume that direct fixed costs are $800,000.
Repeat Part a assuming both a $27 variable cost and $800,000 in direct fixed costs.
Explanation / Answer
Break Even Point is the point at which there is no profit no loss
Break Even Point = Total Fixed Cost/(Sale Price - variable cost)
(Sale Price - variable cost)*Break Even Point = Total Fixed Cost
(Sale Price - variable cost) = Total Fixed Cost/Break Even Point
Sale Price = Total Fixed Cost/Break Even Point + variable cost
What per visit price must be set for the service to breakeven?
Sale Price = Total Fixed Cost/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 750000+275000
Total Fixed Cost = 1025000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 25
Sale Price = 1025000/20000+ 25
Sale Price = $ 76.25
To earn an annual profit of $100,000?
Sale Price = (Total Fixed Cost+annual profit)/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 750000+275000
Total Fixed Cost = 1025000
Annual profit required = 100000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 25
Sale Price = (1025000+100000)/20000+ 25
Sale Price = $ 81.25
Repeat Part a, but assume that the variable cost per visit is $27.
What per visit price must be set for the service to breakeven?
Sale Price = Total Fixed Cost/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 750000+275000
Total Fixed Cost = 1025000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 27
Sale Price = 1025000/20000+ 27
Sale Price = $ 78.25
To earn an annual profit of $100,000?
Sale Price = (Total Fixed Cost+annual profit)/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 750000+275000
Total Fixed Cost = 1025000
Annual profit required = 100000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 27
Sale Price = (1025000+100000)/20000+ 27
Sale Price = $ 83.25
Return to the original data given in the problem. Again repeat Part a, but assume that direct fixed costs are $800,000.
What per visit price must be set for the service to breakeven?
Sale Price = Total Fixed Cost/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 800000+275000
Total Fixed Cost = 1075000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 25
Sale Price = 1075000/20000+ 25
Sale Price = $ 78.75
To earn an annual profit of $100,000?
Sale Price = (Total Fixed Cost+annual profit)/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 800000+275000
Total Fixed Cost = 1075000
Annual profit required = 100000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 25
Sale Price = (1075000+100000)/20000+ 25
Sale Price = $ 83.75
Repeat Part a assuming both a $27 variable cost and $800,000 in direct fixed costs.
What per visit price must be set for the service to breakeven?
Sale Price = Total Fixed Cost/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 800000+275000
Total Fixed Cost = 1075000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 27
Sale Price = 1075000/20000+ 27
Sale Price = $ 80.75
To earn an annual profit of $100,000?
Sale Price = (Total Fixed Cost+annual profit)/Break Even Point + variable cost
Total Fixed Cost = Annual Direct Fixed Costs + Annual Overhead Allocation
Total Fixed Cost = 800000+275000
Total Fixed Cost = 1075000
Annual profit required = 100000
Break Even Point = Expected Annual Utilization
Break Even Point = 20000
Variable cost per visit = 27
Sale Price = (1075000+100000)/20000+ 27
Sale Price = $ 85.75