Question

A new teenage pregnancy clinic will have a fixed cost of \$300,000—start-up costs, hiring advanced practice...

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?

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.