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?

Homework Answers

Answer #1
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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