Question

Average gross revenue per visit = $110

Average bad debt % per visit = 20%

Variable costs per visit = $16

Fixed costs per annum:

Salaries - $575,000

Rent - $50,000

Other - $20,000

1. How many clinic visits are required for the operation to breakeven? Show all calculation steps

2. How many visits are required for the clinic to earn a pre-tax profit of $200,000

Answer 1

Average gross revenue per visit = 110

Bad debt = 20%

net revenue per visit = 110*(1-0.2) = 88

Variable cost per visti = 16

Fixed cost total = 575000 + 50000 + 20000 = 645000

Breakeven point = Fixed cost / ( Selling price - variable cost )

Breakeven point = 645000 / ( 88 - 16) = 8958.33 = 8959 visitis

Let the visits number = n

Net revenue = 88n

Variable cost = 16n

Fixed cost = 645000

Pretax profit = Net revenue - variable cost - fixed cost

So

200,000 = 88n - 16n - 645,000

72n = 845000

n = 11736.11

So on 11737th visit, clinic will earn 200,000 pre tax profit