CHAPTER 7: SERVICE LINE COSTING AND PRICING Homework 3.1, Chapter 7 a. Your hospital is considering...

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 breakeven.

RELEVANT DATA:

Variable cost per visit $8

Annual direct fixed costs $650,000

Annual overhead allocation $70,000

Expected utilization (visits) 10,000

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?

Solutions

Expert Solution

a. Computation of price needed to be breakeven at 10,000 visits:

Break Even visits = Fixed Cost/ Contribution Margin per visit

10,000 visit = ($650,000 + $70,000)/ Contribution Margin per visit

Therefore, Contribution Margin per visit = $72

Also, Contribution per visit = Selling price per visit - Variable expense per visit

$72 = Price per visit - $8

Therefore, Price per visit = $80

Computation of Price necessary to attain desired income of $100,000

Desired Contribution = Fixed Cost + Desired income

Desired Contribution = $720,000 + $100,000 = $820,000

Price to achieve contribution of $820,000 at 10,000 visits means contirbution of $82 per visit

Contribution per visit = Selling price per visit - Variable expense per visit

$82 = Price per visit - $8

Therefore, Price per visit = $90

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

Macroeconomics Chapter 7 Homework

The town of Cleanville lies next to a lake, which the residents of the town use for fishing, boating, and other recreational activities. Last year, two firms, Filth Inc. and Sludge Inc., built factories on the other side of the lake and have been dumping trash into it. Although some of the trash will dissipate naturally, the amount of trash the two firms emit is too much for the lake to handle. Right now, each firm dumps 40 pounds of...

Section 3.1 The Derivative and the Tangent Line Problem Homework Assignment Find the derivative of...

Section 3.1 The Derivative and the Tangent Line Problem Homework Assignment Find the derivative of the function by the limit process f(x)=1/x^2 h(s)=-2√s Find the equation of the tangent line to the graph of the function at the given point. f(x)=x^3+1,(-1,0) f(x)=x-1/x,(1,0) Section 3.2 Basic Differentiation Rules and Rates of Change Homework Assignment Find the derivative of the function g(x)=∜x y=2x^3+6x^2-1 g(t)=π cos⁡t y=7x^4+2 sin⁡x y=3/4 e^x+2 cos⁡x...

MHC 6305 Financial Management Service line costing and pricing,\\ Opening statement// One of the key resaon...

MHC 6305 Financial Management Service line costing and pricing,\\ Opening statement// One of the key resaon to implement the use of managerial accounting pratices in healthcare is to establish rational means to budget for and measure the finanical performance of an organization. Question is Give some examples of how to cut costs while improving care and quality in a healthcare organization service line? Give both pro and cons of some initiatives? Please assits and give some examples of how to...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $210 per day Radiology $296 per image Pharmacy $45 per physician order Chemistry lab $77 per test Operating room $740 per operating room hour The activity usage information associated with the two patients is as follows:...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $252 per day Radiology $355 per image Pharmacy $56 per physician order Chemistry lab $100 per test Operating room $680 per operating room hour The activity usage information associated with the two patients is as follows:...

Activity-based costing for a service company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-based costing for a service company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $260 per day Radiology $210 per image Pharmacy $30 per physician order Chemistry lab $110 per test Operating room $940 per operating room hour The activity usage information associated with the two patients is as follows:...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $237 per day Radiology $334 per image Pharmacy $53 per physician order Chemistry lab $90 per test Operating room $740 per operating room hour The activity usage information associated with the two patients is as follows:...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $240 per day Radiology $215 per image Pharmacy $50 per physician order Chemistry lab $80 per test Operating room $1,000 per operating room hour The activity usage information associated with the two patients is as follows:...

Problem 1 Chapter 7: Your hospital has applied for certification as a level 1 stroke center....

Problem 1 Chapter 7: Your hospital has applied for certification as a level 1 stroke center. It is critical that the following project is completed before the next Joint Commission survey in 18 weeks. Project activity times are listed in the table below. Draw the network diagram and identify the project paths. What is the project completion time and total project costs if only normal times are used? Determine the minimum cost-schedule for this project. What is the difference in...

Service Industry Costing: Select a service industry company of your choice that uses costing and explain...

Service Industry Costing: Select a service industry company of your choice that uses costing and explain the benefits of costing for service companies. Cite your work and include sufficient detail.

Subjects