# Quiz 6: Cost-Volume-Proﬁt Analysis

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. The HU clinic provides annual checkups, sick visits and flu shots: Rent on medical facilities is \$120,000 per year. Other fixed costs are \$5,000 per month. At breakeven point revenues are equal to the costs. Firstly breakeven point will be calculated to know the most pay which HU clinic would be able to pay each month to its employees which is calculated in the following way: Calculation of Revenues: Revenues consist of price per patient multiplied by number of patients.  In the above table revenues are calculated by multiplying price per patient into the number of patients. So, the total revenue is \$216,000. Calculation of total costs: Total costs are the sum of fixed costs (FC) and total variable costs. Total variable costs consists of the variable cost per patient times the number of patients. For fixed costs, So, fixed costs are \$15,000. For total variable costs, So, total variable costs are \$18,000. Therefore, total costs are: At breakeven point revenues are equal to the costs. But here revenues are \$216,000 and costs are \$33,000. So, it is clear that revenues are \$183,000 more than costs. Therefore, the most pay that the HU Clinic can pay to their employees is each month.