Answer:

Breakeven analysis:

It is a managerial tool that is based on the cost, volume and profit. It determines required sales volume and dollar sales to compensate for the given cost structure or price level. At break-even point, total revenue is equal to the total cost. Hence, this is the situation of no profit, no loss. Above break-even point, company starts making profit. In other words, break-even point determines minimum revenue to be generated to recover the cost of production.

Some of the assumptions with respect to breakeven analysis that the manager should consider are listed below:

1. Before starting breakeven analysis all costs should be separated into fixed and variable components.

2. At all volumes, fixed costs should remain constant.

3. Before starting breakeven analysis, it should be assumed that price for different types of patients and for different payers will be constant as volume changes.

4. In order to calculate breakeven, manager needs to estimate the average amount per patient which would be collected from the patients.

5. It is assumed that variable costs will remain same as they are.

Answer:

Break-even analysis

It determines the quantity at which the revenue will be equal to the cost incurred. In other words, it determines the quantity at which there is no profit and no loss. It can be understood as the level of sales at which company is able to recover all the expenses and start earning the profit. It can be calculated by given formula:

In the given problem, the overhead details of operating room department of A are given for the year 2007. Its total revenue is $2,656,500. It charges each patient $1,650 per operation.

The hospital has also charged some overheads to operating room department which amounts to total of $1,516,500

. This is not related to number of operations performed by the department in any way. Therefore, it can be considered as fixed cost to the department.

The department has 3 types of employees depending on the number of operations to be performed annually. This is the variable cost to the department.

To calculate the break-even point it is required to consider every range of operations separately.

For 800 to 1,400 operations

The given table shows information's about above range

Variable cost is $1,110,000

Fixed cost is $1,516,500

Therefore,

At break-even point,

Where,

Q is the number of patients required to break even

And cost charged to each patient is revenue for hospital.(Given in question)

Breakeven point is

This means that to achieve break-even point, the department has to perform 1,592 operations. But this number is out of the given range.

Therefore, it can be concluded that 1,592 is not the feasible break-even point.

1,401 to 1,700 operations

The given table shows information's about above range

Therefore, variable cost = $1,169,000

As calculated above, fixed cost is $1,516,500

Therefore,

At break-even point,

Breakeven point is

This means that to achieve break-even point, the department has to perform 1,628 operations. This number is within the given range.

Therefore, it can be concluded that this is can be the feasible break-even point.

1,701 to 2,372 operations

The given table shows information's about above range

Therefore, variable cost is $1,223,000

As calculated above, fixed cost is $1,516,500

At break-even point,

Breakeven point is

This means that to achieve break-even point, the department has to perform 1,661 operations. But this number is out of the given range.

Therefore, it can be concluded that it is not the feasible break-even point.

2,373 to 2,555 operations

The given table shows information's about above range

Therefore, variable cost is $1,404,500

As calculated above, fixed cost is $1,516,500

Therefore,

At break-even point,

Breakeven point is

This means that to achieve break-even point, the department has to perform 1,771 operations. But this number is out of the given range.

Therefore, it can be concluded that it is not the feasible break-even point.

Thus, from above calculations it can be concluded that that the department should perform minimum 1,628 operations to break even in 2008.

Answer:

Breakeven point (BEP) is the level where the revenue earned equals the cost of earning such revenue. Thus, it is situation where the firm is earning no profit as well as incurring no losses. Thus, BEP is that point where the income equals the invested cost. The formula to calculate BEP is:

There table presents the facts of the query. There are three types of visitors that visit in the clinic each has different rate. The Private type patient are charged $100 per visit, Medicaid are charged $56 per visit, others are charged 90% of private type patient that is 90% of $100 which amounts to $90.

Here, per visit rate (column b) is multiplied with the percent of patients (column a) to determine the weighted price. Similarly the variable cost (column c) is multiplied to calculate the weighted variable cost per unit. This assists in ascertaining the value of BEP admissions that will incur $100,000 profit for the clinic.

Calculate BEP when the total fixed cost is $110,000, profit desired is $100,000 and

Thus,

patients should be admitted to have a profit of $100,000.