CHAPTER 7: SERVICE LINE COSTING AND PRICING Homework 3.1, Chapter 7 a. Your hosp
ID: 2819512 • Letter: C
Question
CHAPTER 7: SERVICE LINE COSTING AND PRICING Homework 3.1, Chapter 7 a. Your hospital is considering offering a new outpatient service. Using the data below, determine the price needed to breakevn. RELEVANT DATA Variable cost per visit Annual direct fixed costs Annual overhead allocation Expected utilization (visits) S8 S650,000 S60,000 15,000 b. Assume now that the CEO is requesting to know what price must be set in order to earn a $100,000 profit. What price must be set in order to meet this desired profit level?Explanation / Answer
break even equation is like that
Expected utilization = fixed cost/(sales per unit - varibale cost per unit)
15000 = ($650000 + $60000)/(sales price - 8)
sales price at breakeven = $55.33
Ans b) if want to earn profit of $100000
sales price * 15000 = 8*15000 + $650000 + $60000 + $100000
sales price = 930000/15000
sales price = $62