Question

Assume that a radiologist group practice has the following cost structure:

Assume that a radiologist group practice has the following cost structure:

Fixed costs

$800,000

Variable cost per procedure

$60

Charge (price) per procedure

$460

 

Furthermore, assume that the group expects to perform 5,000 procedures in the coming year.

a. Construct the group’s base case projected P&L statement. (See exhibit 5-5).

b. What is the group’s contribution margin per unit?

c. What is the group’s breakeven point in volume?

d. What volume is required to provide an operating profit of $400,000?

e. What is the group’s operating leverage?

f. Provide an interpretation of the calculated operating leverage and its implication in regard to business risk. 


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