Question

# Triangle Pediatrics currently provides 1,000 visits per year at a price of \$50 per visit. The...

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. The business manager suggests that Triangle Pediatrics can increase the number of visits to 1,200 per year by cutting the price per visit by \$5 and increasing the fixed advertising budget by \$5,000.

A) Based on this scenario, what is the contribution margin for a volume of 1,000 units?

B) Based on this scenario, what is the profit for a volume of 1,000 units?

C) Based on this scenario, what are the revenues for a volume of 1,200 units?

D) Based on the base case scenario, what is the volume required to breakeven?

 Req A: Selling price 45 Less: VC per visit 30 CM per visit 15 Multiply: Number of visits 1000 Total contribution 15000 Req B: Total Contribution at 1000 visits 15000 Less: Fixed cost Current fixed cost 15000 Advertisement cost 5000 Total fixed cost 20000 Net Loss -5000 Req c: Revenues at 1000 units: Number ofvisits 1000 Multiply: Revise selling price 45 Total revenue 45000 Req d: Selling price 50 Less: VC per visit 30 CM per visit 20 Break even visits: Fixed cost 15000 Divide: CM per unit 20 Break even visits: 750

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