Question

Break-Even Point

Part a.

Part b.

Part c.

Part d.

Givens From Problem:

Costs

Dollars

No.

Dollars

No.

Dollars

No.

Dollars

No.

A

B

C

D

E

F

G

H

I

A

B

C

D

Reimbursement

Reimbursement

Reimbursement

Reimbursement

Per Mammography (P)

75

Fixed Costs

Fixed Costs

Fixed Costs

Fixed Costs

Total Fixed Costs (TFC)

Total Fixed Costs (TFC)

Total Fixed Costs (TFC)

Total Fixed Costs (TFC)

Variable Costs

Variable Costs

Variable Costs

Variable Costs

Variables Costs based on Dollar Amount per Unit

Variables Costs based on Dollar Amount per Unit

Variables Costs based on Dollar Amount per Unit

Variables Costs based on Dollar Amount per Unit

Sum:

Sum:

Sum:

Sum:

Break-Even Point

Break-Even Point

Break-Even Point

Break-Even Point

Break-Even Units (X)

X = TFC / (P - V)

Break-Even Units (X)

X = TFC / (P - V)

Break-Even Units (X)

X = TFC / (P - V)

Break-Even Units (X)

X = TFC / (P - V)

Targeted Profit

Targeted Profit

Targeted Profit

Targeted Profit

Targeted Profit (TF)

Targeted Profit (TF)

Targeted Profit (TF)

Targeted Profit (TF)

Units required to reach targeted TF, X = (TFC + TF) / (P-V)

Units required to reach targeted TF, X = (TFC + TF) / (P-V)

Units required to reach targeted TF, X = (TFC + TF) / (P-V)

Units required to reach targeted TF, X = (TFC + TF) / (P-V)

Scenario: Pacific Imaging Center is a small imaging center with two analogue film or screen units. As the director of the center, Juanita Hernandez has been asked to determine if the current staffing is correct for her place or should she add another technologist. She currently uses 2 mammography units, 2 technologists, and 1 aide. She has analyzed the current costs and determined the following:

Reimbursement per screen $75 Equipment costs per month ($800 per machine) $1,600 Technologists costs per mammography $20 Technologists aide per mammography $4 Variable cost per mammography $10 Equipment maintenance per month per machine ($350 per machine) $700

A. Solve for monthly volume to break even. B. Solve for monthly volume needed to break even at desired $5,000 per month profit level. C. Solve for volume needed to break even at new reimbursement of $112 per screen and no profit. D. Solve for volume needed to break even with an additional technologist

Expert Answer

Answer 1

Reimbursement per screen $75

Equipment costs per month ($800 per machine) $1,600

Technologists costs per mammography $20

Technologists aide per mammography $4

Variable cost per mammography $10

Equipment maintenance per month per machine ($350 per machine) $700

A.

Total fixed cost = Equipment costs per month + Equipment maintenance per month per machine = $1600 + $700

= $2300

Price = $75

Variable Cost = Technologists costs per mammography + Technologists aide per mammography + Variable cost per mammography

= $20 + $4 + $10 =

= $34

Break-Even Units = Total Fixed Cost / (Price – Variable Cost)

= $2300 / ($75 - $34)

= $2300/$41

= 56 units

B.

Monthly volume needed to break even at desired $5,000 per month profit level

Target volume = Total Fixed Cost + Target profit/(Price – Variable Cost)

= $2300 + $5000/($75 - $34)

= $7300/$41

= 178 units

C.

Monthly volume needed to break even at new reimbursement of $112 per screen and no profit. That means price = $112

Break-Even Units = Total Fixed Cost / (Price – Variable Cost)

= $2300 / ($112 - $34)

= $2300/$78

= 29 units

D.

Monthly volume needed to break even with an additional technologist. That means an extra Technologists costs per mammography $20 and Technologists aide per mammography $4 will be added in variable cost.

Break-Even Units = Total Fixed Cost / (Price – Variable Cost)

= $2300 / ($75 - $58)

= $2300/$17

= 135 units