Discuss the importance of determination of fixed and variable costs for breakeven and profitability analysis. Use...

Discuss the importance of determination of fixed and variable costs for breakeven and profitability analysis. Use the health care institution as an example for analysis to support your points

Expert Solution

The break even point is when the firm is able to recover the fixed cost incurred. This recovery is in the form of contribution to the firm which is calculated as sales - variable cost

Formula for break even point = Fixed cost / Sales - Variable Cost.

Hence to arrive at the break even point and profitability determination of fixed and variable cost is very important.

Healthcare Institutions have a huge amount of fixed cost which include salaries of the employee, building maintenance, rent, utlities, equipment. The hospitals have to incur the fixed cost regardless of the patient inflow to maintain the standard of the treatment provided to patients. Since fixed costs form such ahuge part of the healthcare institutions, they have to keep a track of the fixed cost in order to arrive at a break even point. it helps in determining what they can charge a patient in order to recover the fixed cost.

jeff jeffy answered 1 year ago

breakeven analysis assumes that all costs are fixed or variable. In reality, this is an inaccurate...

breakeven analysis assumes that all costs are fixed or variable. In reality, this is an inaccurate assumption. Some costs are semi-variable and mixed. In the book discusses 3 different ways to separate mixed and variable costs into fixed and variable parts, but these are estimates as well. Considering the inaccuracies and estimates in the assumptions, what is the point of doing break even analysis at all?

. Fixed Costs, Variable Costs, Total Costs, Revenues are used to estimate profitability. This is an...

. Fixed Costs, Variable Costs, Total Costs, Revenues are used to estimate profitability. This is an intersection with Economics and Accounting. Explain how they are derived and used for both disciplines.

Describe and discuss the importance of profitability, solvency and liquidity for the financial analysis of a...

Describe and discuss the importance of profitability, solvency and liquidity for the financial analysis of a business.

In financial management, what is the importance of completing a breakeven analysis? How does a breakeven...

In financial management, what is the importance of completing a breakeven analysis? How does a breakeven analysis help organizations budget in the short and long term? How does the breakeven analysis connect revenues and expenses for specific initiatives?

uestion 1 – Breakeven Chart with Increases in Fixed Costs (a) Identify and discuss briefly five...

uestion 1 – Breakeven Chart with Increases in Fixed Costs (a) Identify and discuss briefly five assumptions underlying cost-volume-profit analysis. (b) A local authority, whose area include a holiday resort situated on the east coast, operates, for 30 weeks each year, a holiday home which is let to visiting parties of children in care from other authorities. The children are accompanied by their own house mothers who supervise them throughout their holiday. From six to fifteen guests are...

Question 1 – Breakeven Chart with Increases in Fixed Costs (a) Identify and discuss briefly five...

Question 1 – Breakeven Chart with Increases in Fixed Costs (a) Identify and discuss briefly five assumptions underlying cost-volume-profit analysis. (b) A local authority, whose area include a holiday resort situated on the east coast, operates, for 30 weeks each year, a holiday home which is let to visiting parties of children in care from other authorities. The children are accompanied by their own house mothers who supervise them throughout their holiday. From six to fifteen guests are...

What is the difference between fixed costs and variable costs?’ Are there fixed costs in the...

What is the difference between fixed costs and variable costs?’ Are there fixed costs in the long run? Explain briefly. Are fixed costs also sunk costs? Explain. What are diminishing marginal returns as they relate to costs? Which costs are measured on a per-unit basis: fixed costs, average cost, the average variable cost, variable costs, and marginal cost? How is each of the following calculated: marginal cost, average total cost, average variable cost? What shapes would you generally expect each...

Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or...

Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity and the associated activity driver that allow you to define the cost behavior. For example, assume that the resource input is “cloth in a shirt." The activity would be "sewing shirts," the cost behavior "variable," and the activity driver "units produced." Prepare your answers in the following format: Activity Cost Behavior Activity Driver a. Flu vaccine Assembling Delivering orders Filing...

Tech Com's. predicted 2017 variable and fixed costs are as follows: Variable costs Fixed costs Manufacturing...

Tech Com's. predicted 2017 variable and fixed costs are as follows: Variable costs Fixed costs Manufacturing 480,000 315900 Selling and Administrative 216,000 60500 Total 696,000 376,400 Tech com. produces a wide variety of computer interface devices. Per unit manufacturing cost information about one of these products, a high-capacity flash drive is as follows: Direct material $10 Direct labor 9 Variable Manufacturing Overhead 7 Fixed Manufacturing Overhead 9 Total manufacturing costs $35 The following is the variable selling and administrative costs...

If a firm has fixed costs of $45,000, a price of $9.00, and a breakeven point...

If a firm has fixed costs of $45,000, a price of $9.00, and a breakeven point of 22,500 units, the variable cost per unit is:

Question