Mercy Hospital has total variable costs of 80% of total revenues and fixed costs of $20 million per year.There are 70,000 estimated patient-days for next year.What is the break-even point expressed in total revenue?
A)$10 million
B)$12.5 million
C)$20 million
D)$100 million

Question

Quizplus · Accepted Answer

To find the break-even point in total revenue, we use the formula: Break-even Revenue = Fixed Costs / (1 - Variable Cost Ratio). Here, Fixed Costs = $20 million and Variable Cost Ratio = 80% or 0.8. Thus, Break-even Revenue = $20 million / (1 - 0.8) = $20 million / 0.2 = $100 million.

Mercy Hospital Has Total Variable Costs of 80% of Total