Question

Please answer question A:

5.8 You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows: Revenes (10,000 visits) 400,000 Wages and benefits 220,000 Rent Depreciation 30,000 Utilities 2,500 Medical supplies 50,000 Administrative supplies 10,000 Assume that all costs are fixed except supply costs, which are variable. Furthermore, assume that the clinic must pay taxes at a 30 percent rate a. Construct the clinic's projected P&L statement. b. What number of visits is required to break even? .s. What number of visits is required to provide you with an after-tax profit of 100,000? ------------.-.-

Answer 1

1)

Profits		Lost
Total Revenue	400,000	Variable cost	60,000
Margin	340,000	Fixed cost	257,500

　

Total fixed cost = Wages + Rent + Depreciation + Utilities

= $220,000 + $5,000 + $30,000 + $2,500

= $257,500

Total Variable cost = Medical supplies + Administrative supplies = $50,000 + $10,000= $60,000

Total Revenue = $40 * 10,000 visits = $400,000

Contribution margin = Total Revenue - Variable cost = $400,000 - $60,000 = $340,000

Profit = Contribution margin - Fixed cost = 340,000 - 257,500 = 82,500

　

2) Solution: 7,574 visits

Working:

Profit = Total Revenue - Total Variable Cost - Total Fixed Cost

= ($40 * No. of Visits) - (6 * No. of Visits) - 257,500

= (34*No. of Visits) - 257,500

For breakeven:

(34*No. of Visits) - 257,500 = 0

No. of Visits = 257,500 / 34 = 7,574

　

3) Solution: 11,775 visits

Working:

Pre tax profit = 100,000/ (1-0.3) = 100,000/0.7 = 142,857.14

Pre tax profit = Total Revenue - Total Variable Cost - Total Fixed Cost

= ($40 * No. of Visits) - (6 * No. of Visits) - 257,500 - 142,857.14

= (34*No. of Visits) - 257,500 - 142,857.14

= (34*No. of Visits) - 400,357.14

　

For breakeven:

(34*No. of Visits) - 400,357.14 = 0

No. of Visits = 400,357.14 / 34 = 11,775