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    Devry University
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Category > Business & Finance Posted 14 Dec 2017 My Price 10.00

calculating the new fee schedule

in problem 7.2 (b), why would you subtract the overhead allocation from the cost per procedure instead of adding in calculating the new fee schedule? I've attached your original worksheet.


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. b.) What is the group’s contribution margin? What is its breakeven point? c.) What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000 d.) Sketch out a CVP analysis graph depicting the base case situation. Facts of the question Fixed costs 500000 Variable cost per procedure 25 Revenue per procedure 100 Expected procedures 7500 a Base case profit and loss account Revenue 750000 Variable cost 187500 Gross profit 562500 Fixed cost 500000 Net Income 62500 b Contribution margin Revenue 750000 Variable cost 187500 Contribution margin 562500 Contribution margin ratio 0.75 Break even = Fixed cost (Revenue - variable cost) = 500000 (100-25) = 6667 procedures c Pretax profit 100000 Number of procedures Fixed cost + pretax profit (Revenue - variable cost) = 8000 procedures Pretax profit 200000 Number of procedures Fixed cost + pretax profit (Revenue - variable cost) = 9333 procedures d CVP graph 0 1 1000 2000 4000 6000 7000 7500 Revenue 0 100 100000 200000 400000 600000 700000 750000 Variable cost 0 25 25000 50000 100000 150000 175000 187500 Fixed cost 500000 500000 500000 500000 500000 500000 500000 500000 Net Income -500000 -499925 -425000 -350000 -200000 -50000 25000 62500 e With 20% discount Fixed costs 500000 Variable cost per procedure 25 Revenue per procedure 80 Expected procedures 7500 Base case profit and loss account Revenue 600000 Variable cost 187500 Gross profit 412500 Fixed cost 500000 Net Income -87500 Contribution margin Revenue 600000 Variable cost 187500 Contribution margin 412500 Contribution margin ratio 0.6875 Break even = Fixed cost (Revenue - variable cost) = 500000 (80-25) = 9091 procedures Pretax profit 100000 Number of procedures Fixed cost + pretax profit (Revenue - variable cost) = 10909.0909090909 procedures Pretax profit 200000 Number of procedures Fixed cost + pretax profit (Revenue - variable cost) = 12727 procedures CVP graph 0 1 1000 2000 4000 6000 7000 7500 Revenue 0 80 80000 160000 320000 480000 560000 600000 Variable cost 0 25 25000 50000 100000 150000 175000 187500 Fixed cost 500000 500000 500000 500000 500000 500000 500000 500000 Net Income -500000 -499945 -445000 -390000 -280000 -170000 -115000 -87500 e.) Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent  Discount from charges. REDO questions a, b, c, and d under these conditions.  0 1 1000 2000 4000 6000 7000 7500 -600000 -400000 -200000 0 200000 400000 600000 800000 1000000 Revenue Variable cost Fixed cost Net Income 1 2 3 4 5 6 7 8 -600000 -400000 -200000 0 200000 400000 600000 800000 Revenue Variable cost Fixed cost Net Income
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CourseLover
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Status NEW Posted 14 Dec 2017 03:12 PM My Price 10.00

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