Question

Triangle Pediatrics currently provides 1,000 visits per year at a price of $50 per visit. The variable cost per visit (variable cost rate) is $30, and total fixed costs are $15,000.

What is the...

· contribution margin for a volume of 1,000 units

A: $15,000

B: $45,000

C: $20,000

D:   $38,000

· profit for a volume of 1,000 units?

A: $20,000

B: $15,000

C: $10,000

D: $5,000

· the volume required to breakeven?

A: 650 visits

B: 750 visits

C:   850 visits

D:   900 visits

Answer 1

Contribution margin = Contribution / Sales

Contribution = Selling price - variable cost

• Contribution per unit = $50 - $30 = $20
• Contribution amount = $20 * 1000 units = $20,000
• Answer: option C

Profit for volume of 1000 units = Selling price - Cost

• Selling price = $50 * 1000 = $50,000
• Cost = Variable cost + Fixed cost = $30 * 1000 + $15,000 = $30,000 + $15,000 = $45,000
• Profit = $50,000 - $45,000 = $5,000
• Answer: option D

Volume required to break-even:

• Break-even point is where Revenue is equal to cost.
• $50 * V = $15,000 + $30 * V; where = V = Volume required to break-even
• $(50 V - 30V) = $15,000
• 20V = 15,000
• V = 750 visits
• Answer: option B