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Grandview Clinic has fixed costs of $2 million and an average variable cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates the population served will average two visits per year.
Sketch two CVP analysis graphs for the clinic-one with number of visits on the x -axis and one with number of members on the x -axis.
Problem 1: What profit gain can be realized if the clinic can lower per member utilization to 1.8 visits?
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