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.

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