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5.1 Assume the managers of the Fort Winton Hospital are setting the price on a new...

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Finance

5.1 Assume the managers of the Fort Winton Hospital are settingthe price on a new outpatient service. Here are the relevant dataestimates:

Variable cost per visit $5.000

Annual direct fixed costs $500,000

Annual overhead allocation of $50,000

Expected Annual utilization 10,000 visits

  1. What per-visit price must be set for the service to break-even?To earn an annual profit of $100,000?
  1. Repeat part a, but assume that the variable cost per visit is$10.
  1. Return to the data given in the problem. Again, repeat part a,but assume that direct fixed costs are $1,000,000.
  1. Repeat part a assuming both a $10 variable cost and $2,000,000in direct fixed costs

Answer & Explanation Solved by verified expert
3.7 Ratings (698 Votes)
Let Price per visit S Variable Cost V 5 Contribution Price Variable S5 Annual Fixed CostF Annual Direct Fixed Cost Annual Overhead Allocation F 500000 50000 550000 Number of visits 10000 Breakeven point Fixed Cost    See Answer
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5.1 Assume the managers of the Fort Winton Hospital are settingthe price on a new outpatient service. Here are the relevant dataestimates:Variable cost per visit $5.000Annual direct fixed costs $500,000Annual overhead allocation of $50,000Expected Annual utilization 10,000 visitsWhat per-visit price must be set for the service to break-even?To earn an annual profit of $100,000?Repeat part a, but assume that the variable cost per visit is$10.Return to the data given in the problem. Again, repeat part a,but assume that direct fixed costs are $1,000,000.Repeat part a assuming both a $10 variable cost and $2,000,000in direct fixed costs

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