Question

• Discuss if you would develop a strategic plan to move forward based on the sample break-even analysis.
• Explain how the sample break-even analysis might be used to make a long-term financial decision.
• Assess the potential financial impact of the sample break-even analysis as it relates to organizational strategy, patient care, or community health.

Answer 1

Break even analysis measures the units required for the business to sell to cover its fixed costs. It is the stage where the company makes no profits and no losses. A strategic plan can be made on the basis of break even plan to determine the number of units that the company must sell to survive, the fixed and variable costs involved and the contribution margin that will be required.

A break even analysis can be used for the following long term financial decision:

1.Helps ascertain the number of units that the company must sell to survive failing which it will have to shut down.

2. The improvements that can be made to the selling price and reduce costs to increase contribution margin to increase profitability.

3. The fixed costs that can be reduced to improve profits.

4. The margin of safety that will be required to meet any unforeseen expenditure

The break even analysis in a patient care or community health care can be used to determine the fees that has to be collected from the patients to maintain the facility i.e. fixed costs that will be incurred to run the hospital. Also, it is used to determine if the insured and uninsured patients can cover all the direct and indirect costs.