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

Break Even Point:

• Break Even Point refers to a level of sales/revenue at which company has "no profit no loss".
• After crossing break even point company started to earn profits however, below the break even point company was into losses.
• Therefore, the analysis of Break Even point is necessary for determination of Level of Production, desired level of sales etc.
• At the Break Even Point, company's Contribution is equals to the Fixed Cost i.e. contribution is sufficient enough to recover fixed cost but not able to contribute towards profits.
• Break Even Analysis is also helpful to determine Margin of Safety level of company which is, Sales over and above the Break even sales.
• Break Even Analysis is sometimes also called as Cost-Volume-Profit Analysis.

Break Even Point for Health Care Industry:

• Health care Industry is Multi-service based industry, But the units of each output are connected to selling prices.
• To compute break even point for health care industry, we should first identify weights of each product/services being sold.
• Break Even Point= Total Fixed cost / (Weighted Average Selling Price- Weighted Average Variable Cost)
• Formula can also be written as, Total Fixed Cost / Weighted Average Contribution per unit
• Below is the graph showing Break Even Point:

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