Finance-Assume that the managers of the Fort Winston Hospital

| January 30, 2017

Question
Assume that the managers of the Fort Winston Hospital are setting the price on a new outpatient service. Here are the relevant data estimates:

Variable Cost Per Visit $5.00

Annual Direct fixed Cost $500,000

Annual overhead allocation $50,000

Expected annual utilization 10,000 visits

A) What per visit price must be set for the service to break-even? To earn an annual profit of $100,000?

B) Repeat part A but assume that the variable cost per visit is $10.

C) Return to the data given in the problem. Again repeat part A, but assume the direct fixed costs are $1,000,000.

D) Repeat part A assuming both a $10 variable and $1,000,000 in direct fixed costs.

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