21 Jun Break-even exercise Break-Even Analysis or Cost Volume Profit Analysis (CVP)
Break-even exercise
Break-Even Analysis or Cost Volume Profit Analysis (CVP)
The California Medical Hospital is a full service hospital in Burbank, CA. Kathy Potts, the Chief Surgeon and Regina Johnson, the Hospital Administrator, have been working on a project to bring a new product to their hospital, knee replacements, to expand the services provided in hopes of bringing in additional revenue.
After much analysis and market studies the two are ready to present their findings to the board. You are the Finance Director who has put the information together.
They have decided that a new knee replacement will cost $17,000. The supplies used will cost the hospital $9,500 and the selling expenses paid amount to $3,000 per knee. The wing they will use will rent for $15,500 per month and the surgeon will receive a fixed salary of $25,000 per month. (Show your work on all problems)
- Determine the number of knee replacements (in units) that particular wing must perform each month to break even. (Break-Even Point or BEP). In other words how many knee replacements must the surgeon perform each month to break-even?
- Determine the number of knee replacements that particular wing must perform in order to generate a profit of $100,000 per month.
- Assume that the surgeon can now open a clinic on his own with the following costs:
Variable costs = $9,500 per knee
One additional employee at a cost of $1,000 per month
Everything else remains the same from above (The rent becomes the mortgage payment, the surgeon will accept the same salary, and the SP is still $17,000)
Determine the number of knee replacements to break-even.
- Determine the number of knee replacements needed to generate a profit of $100,000 per month
What scenario would you recommend and why?
- Please graph scenario #1 only. You may use excel or draw and attach the graph. I encourage you to try MS Excel for the experience. Label the X and Y axis. Plot the break-even point and show the fixed cost line. ( I only want to see three lines on the graph and the rest should be labelled)
6. Define break even analysis and its importance in the health care industry
7. Define variable costs
8. Define contribution margin
9. Define fixed costs
10. Compare and contrast a variance analysis and a sensitivity analysis.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.