Question

A new teenage pregnancy clinic will have a fixed cost of $300,000—start-up costs, hiring advanced practice nurses and employees, salaries, purchase of equipment, and other miscellaneous items.

Also, the teenage pregnancy clinic has variable costs of $200 per patient visit—medical equipment, educational materials, and other miscellaneous items.

There will be three levels of patient treatment:

Simple = initial assessment and four prenatal visits

Moderate = continuous treatment and monthly visits

Complex = high-risk treatment

Each patient will be charged the following per visit, based on the following categories:

Simple 15% = $400

Moderate 60% = $1,000

Complex 25% = $2,000

The projected patient visits per year are anticipated to be 4,800 visits. How many patients would the clinic have to provide services for to break even and at what point would this occur?

Answer 1

Fixed Cost = 300,000

Variable Cost = 200 per visit

Say the clinic requires X visits to break even.

Total Cost = 300000 + 200X

At the breakeven point, Total Revenue = Total Cost

Category	%age	Visits per category	Revenue per visit	Total Revenue per category
Simple	15%	0.15X	400	60X
Moderate	60%	0.60X	1000	600X
Complex	25%	0.25X	2000	500X

Total Revenue = 60X + 600X + 500X = 1160X

At breakeven,

1160X = 300000 + 200X

960X = 300000

X = 312.5

Hence, clinic has to provide services to 313 patients to breakeven.