Question

anaylsis

You are the ceo of a facility and Aetna has offered you a contract. Develop the P&L statement for the following assumptions between and 65,000 procedures in increments of 2,500:

• Aetna is offering you a contract that will pay you $55 per procedure

• Variable costs per procedure = $37.00

• Fixed costs = $1,000,000

•You will need to hire an additional salaried employee with volumes of 40,000 or more at an annual cost of $50,000

questions

what is contribution to margin in dollars?

what is average cost per test with volume of 10,000 tests?

what are total variable costs for volume of 55,000 tests?

please show your excel sheet for volumes 0 - 65,000 so i can see how its done

Answer 1

Answers:

Workings:

As you requested the excel sheet for volumes 0 - 65,000 with a 2500 break is given below:

Units	Sales revenue	Variable costs	Fixed Costs	Total Costs
2500	1,37,500	92,500	10,00,000	10,92,500
5000	2,75,000	1,85,000	10,00,000	11,85,000
7500	4,12,500	2,77,500	10,00,000	12,77,500
10000	5,50,000	3,70,000	10,00,000	13,70,000
12500	6,87,500	4,62,500	10,00,000	14,62,500
15000	8,25,000	5,55,000	10,00,000	15,55,000
17500	9,62,500	6,47,500	10,00,000	16,47,500
20000	11,00,000	7,40,000	10,00,000	17,40,000
22500	12,37,500	8,32,500	10,00,000	18,32,500
25000	13,75,000	9,25,000	10,00,000	19,25,000
27500	15,12,500	10,17,500	10,00,000	20,17,500
30000	16,50,000	11,10,000	10,00,000	21,10,000
32500	17,87,500	12,02,500	10,00,000	22,02,500
35000	19,25,000	12,95,000	10,00,000	22,95,000
37500	20,62,500	13,87,500	10,00,000	23,87,500
40000	22,00,000	14,80,000	10,00,000	24,80,000
42500	23,37,500	15,72,500	10,50,000	26,22,500
45000	24,75,000	16,65,000	11,00,000	27,65,000
47500	26,12,500	17,57,500	11,50,000	29,07,500
50000	27,50,000	18,50,000	12,00,000	30,50,000
52500	28,87,500	19,42,500	12,50,000	31,92,500
55000	30,25,000	20,35,000	13,00,000	33,35,000
57500	31,62,500	21,27,500	13,50,000	34,77,500
60000	33,00,000	22,20,000	14,00,000	36,20,000
62500	34,37,500	23,12,500	14,50,000	37,62,500
65000	35,75,000	24,05,000	15,00,000	39,05,000

Step by step Answers:

a.) what is contribution to margin in dollars?

Contribution margin in dollars = Sales revenue - Variable costs

= $3,575,000 - $2,405,000

= $1,170,000

Contribution margin Per unit = Selling price - Variable price

= $55 - $37

= $18

.

b.) what is average cost per test with volume of 10,000 tests?

Total cost = Variable cost + Fixed cost

= (10000 × $37) + $1,000,000

= $370,000 + $1,000,000

= $1,370,000

Cost Per Unit = $1,370,000 ÷ 10,000

= $137

.

c.) what are total variable costs for volume of 55,000 tests?

Total Variable costs = Units × Variable cost per unit

= 55,000 × $37

= $2,035,000.