Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant…

Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates:

Variable cost per visit $5.00

Annual direct fixed costs $500,000

Annual overhead allocation $50,000

Expected annual utilization 10,000

 

  1. What per-visit price must be set for the service to break even? To earn an annual profit of $100,000?
  2. Repeat Part a, but assume that the variable cost per visit is $10.

 

  1. Return to the data given in the problem. Again repeat a, but assume that direct fixed costs are $1,000,000 in direct fixed costs.
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