Question

In: Accounting

Assume that a radiologist group practice has the following cost structure: Fixed Costs $500,000 Variable cost...

Assume that a radiologist group practice has the following cost structure:

	Fixed Costs	$500,000
	Variable cost per procedure	25
	Charge (revenue) per procedure	100

Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.

a. Construct the group's base case projected P&L statement

	Total revenues	$ 750,000
	Total variable costs	$ (187,500)
	Total contribution margin	$ 562,500
	Fixed costs	$ (500,000)
	Profit (net income)	$ 625,000

b. What is the group's contribution margin? What is its breakeven point?

	Revenue per procedure	$ 100
	Variable cost per procedure	$ 25
	Contribution margin per procedure	$ 562,500

	Fixed costs
	Contribution margin per procedure
	Accounting Breakeven		visits

c.1 What volume is required to provide a pretax profit of $100,000?

	Fixed costs
	Target profit
	Contribution margin per procedure
	Economic Breakeven		visits

c.2 What volume is required to provide a pretax profit of $200,000?

	Fixed costs
	Target profit
	Contribution margin per procedure
	Economic Breakeven		visits

d. We are skipping

e. now assume a 20 percent discount from charges. Redo questions a, b, and c under these conditions.

redo a. Construct the group's base case projected P&L statement

	Total revenues
	Total variable costs
	Total contribution margin
	Fixed costs
	Profit (net income)

redo b. What is the group's contribution margin? What is its breakeven point?

	Revenue per procedure
	Variable cost per procedure
	Contribution margin per procedure

	Fixed costs
	Contribution margin per procedure
	Accounting Breakeven		visits

redo c.1 What volume is required to provide a pretax profit of $100,000?

	Fixed costs
	Target profit
	Contribution margin per procedure
	Economic Breakeven		visits

redo c.2 What volume is required to provide a pretax profit of $200,000?

	Fixed costs
	Target profit
	Contribution margin per procedure
	Economic Breakeven		visits

Expert Solution

Answer

A.

Sales = Fixed cost + Variable cost + Profit

Gross profit = Sales - Variable cost - Fixed cost

Gross profit = $750,000(7500 *100) -$187,500 -- $500,000

Gross profit = $62500

B.

Contribution margin = Sales - Variable cost

Contribution margin =$750,000 - $187,500

Contribution margin =$562,500

Break even point =Fixed cost/P.V ratio

Break even point ==$500,000/75 =$6667

P/V ratio =Contribution/Sales*100

=$562,500/$750,000*100

=75

C.

(Fixed Costs + Specified Profit) / Contribution Margin per unit

If the Specified profit is $100,000 then sales volume is =(500000 + 100000)/75

600000/75= 8,000

If the Specified profit is $100,000 then sales volume is =(500000 + 200000)/75

700000/75= 9,333

E.

Now 20% discount charges, then Each procede would cost is $80

Variable cost is =$187,500

Sales =$600,000

Fixed cost =$500,000

Sales - Variable cost = Gross profit

600,000 - 187,500 = Gross profit

Gross profit =$412,500

Net Profit = Gross profit - Fixed cost

= $412,500 -$500,000

Net loss =(-)$87500

Contribution = Sales -Variable cost

=$412,500

Break even point =Fixed cost/P.V ratio

P/V ratio =Contribution/Sales*100

=412,500/600,000

=69

Break even point = $500,000/69

=7246

Sales = (Fixed cost + Desired Profit)/P.V Ratio

Sales volume if the desired profit is $100,000

Sales = (500,000 +100,000)/69

=600,000/69

=8696

Sales volume, if the desired profit is $200,000

Sales =(500,000 + 200,000)/69

=700,000/69

=10145

ekkarill92 answered 10 months ago

Assume that a radiologist group practice has the following cost structure: Fixed costs $500,000 Variable cost...

Assume that a radiologist group practice has the following cost structure: Fixed costs $500,000 Variable cost per procedure 25 Charge (revenue) per procedure 100 Furthermore, assume that the group expects to perform 7,500 proce- dures in the coming year. a. Construct the group’s base case projected P&L statement. b. part 1 - What is the group’s contribution margin? b. - part 2 - What is its breakeven point? c. part 1 - What volume is required to provide a pretax...

5.3 Assume that a radiologist group has the following cost structure: Fixed costs $500,000 Variable cost...

5.3 Assume that a radiologist group has the following cost structure: Fixed costs $500,000 Variable cost per procedure $25 Charge(revenue) per procedure $100 Furthermore, assume that the group expects to perform 7,500 procedures in the coming year. a. Construct the group's base case projected P & L statement. b. What is the group's contribution margin? What is the breakeven point? c. What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000? e.Now assume that...

1. 2 Assume that a cardiologist group practice has the following cost structure: Fixed Cost: $500,000...

1. 2 Assume that a cardiologist group practice has the following cost structure: Fixed Cost: $500,000 Variable Cost Per Procedure: $25 Furthermore, assume that the group expects to perform 7,500 procedures in the coming year. A. What is the group’s underlying cost structure? B. What are the groups expected total cost? C. What are the groups' estimated total costs at 5,000 procedures? At 10,000 procedures? D. What is the average cost per procedure at 5,000, 7,500 and 10,000 procedures?...

The problem: 5.6 The fixed cost for a group practice is $500,000, Variable cost per procedure...

The problem: 5.6 The fixed cost for a group practice is $500,000, Variable cost per procedure is 25 and the charge per procedure is 100. The group predicts to perform 7500 procedures in the year. How would I construct the group's base case projected P&L statement? What is the group's contribution margin? What is the breakeven point (in number of procedures)? What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000? Sketch out a...

Part 1) Assume that XYZ lab has the following cost structure: Fixed Costs = $450,000 Variable...

Part 1) Assume that XYZ lab has the following cost structure: Fixed Costs = $450,000 Variable cost per test = $20 Charge per procedure = $100 What volume is required to break even? What volume is required to generate a profit of $300,000? Part II) Using the data in Part I above, assume that Aetna proposes a 25% discount from charges, what volume would then be required to break even? Hint: Discount the charge per test before entering it into...

1. Bronx Lebanon Diagnostic Care has the following cost structure: Fixed Costs $800,000 Variable cost per...

1. Bronx Lebanon Diagnostic Care has the following cost structure: Fixed Costs $800,000 Variable cost per procedure $35 Charge (revenue) per procedure $110 Assume that the Bronx Lebanon Diagnostic Care expects to perform 7,500 procedures in the coming year. a. Construct the groups base case projected P & L statement. Insert your response here. b. What is the group’s contribution margin? Insert your response here. c. What is the breakeven point? (in number of procedures) Insert your response here. d....

Fixed costs are assumed to be $500,000 per year. The company estimates the variable cost per...

Fixed costs are assumed to be $500,000 per year. The company estimates the variable cost per unit (v) to be $75 and expects to sell each unit for $425. There are no taxes and the required rate of return is 22% per year. Suppose that sales are currently estimated to be 5000 units per month. What is the degree of operating leverage? (Round to 1 decimal place, ie 2.3) Using your answer from above, estimate what the new monthly operating...

2. Describe a fixed cost, variable cost. Explain why the variable and fixed costs are important...

2. Describe a fixed cost, variable cost. Explain why the variable and fixed costs are important in cost accounting. Give your opinion

1. A company that makes cell phones has the following cost structure. The have fixed costs...

1. A company that makes cell phones has the following cost structure. The have fixed costs of $145 000 per period and manufacturing costs of $15.16 per cell phone. Advertising is expected to be $25 000 per period and a special promotional contest will involve providing a free case for a cost of $5.30 per cell phone. Each cell phone sells for $49.95. What is the break-even point in the number of phones? 2. A pen manufacturer makes luxury pens....

Assume Phony Company has variable costs per unit of $23, fixed costs of $600,000, and a...

Assume Phony Company has variable costs per unit of $23, fixed costs of $600,000, and a break-even point in units of 60,000 units. If the sales price per unit decreases by $4 and the variable cost per unit decreases by $4, what would happen to the break-even point? A. Break-even point stays the same. B. Break-even point increases. C. Break-even point in dollars decreases. D. Break-even point in dollars decreases and break-even point in units stays the same.