Reference no: EM13483566

Question from Gapenski's Fundamentals of Health care Finance.

Assume that the managers of 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 costs             $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? What price must be set 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 that direct fixed costs are $1,000,000.

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