Question

Big Sky Dermatology Specialist are setting the price on a new office location. Here are the relevant data estimates: Variable Cost Per Visit               $8.00 Annual Direct fixed Cost           $650,000 Annual overhead allocation       $65,000 Expected annual utilization      10,000 visits

What per visit price must be set for the service to break-even? To earn an annual profit of $100,000?

Insert your response here.

Repeat Part a. but assume that the variable cost per visit is $12.

Insert your response here.

Return to the data given in the problem. Again repeat Part a, but assume that direct fixed costs are $1,000,000.

Insert your response here.

Repeat Part a assuming both a $10. Variable cost and $1,000,000 in direct fixed costs.

Insert your response here.

Answer 1

Thesre are 4 parts of the question.All parts ask for Breakeven Point. Breakeven point is the point at which there is no profit and no loss or a point where you just recoverd all your cost associated.

Given: Varibale cost =$8, Ddirect Fixed Cost= $650000, Overhead  Allocation= 65000, Annual vsists = 10000

a) Per visit price must be set for the service to break-even:

Break Even price per visit =

=

Breakeven price per visit = 79.5

b) Repeat part a with variable cost 12 instead of 8.

=

Break even Price with VC 12 = 83.5

c) Direct Fixed cost 1000000

=

Break even with FC 1 million.= 114.5

d) Now VC 10 and Fixed cost 1000000

=

Break even with FC 1 million and VC 10 = 116.5