Question

Create a Cost-Volume-Profit chart. Break-even analysis is an important part of your fiscal education.  Select an item or product used in your healthcare organization and describe how you would calculate the break-even point.  This could be the use of a sterile instrument tray, an admission/registration software product, outsourced transcription, or even a new EMR. Describe why this break-even information is useful.  Create a graph showing your break-even point.  

Recommended 300 to 400 words

Answer 1

The breakeven point is the point where total cost equals the total revenue leading to zero profit.

Breakeven point can be calculated using the following formula:

Breakeven point = Fixed Cost / (Price per unit - variable costs per unit)

In the case of the X-Ray unit, Fixed cost will be the cost of the X-Ray machine and labor cost per year, Selling price per unit will be the amount charged per X-Ray done buy the unit and variable costs will be the materials cost, electricity cost, maintenance cost and other supplies cost.

Using the above formula it can be calculated how many X-rays needs to be done to make the unit profitable.

Breakeven unit helps in the decision making of the product. If the breakeven point is higher than the expected demand of the product, then the project will not be profitable and hence it should not be accepted.

Breakeven Point Sales Total Revenue Total Cost Variable Cost Fixed Cost Breakeven Quantity (Q) Quantity (a)

Graph of breakeven point