Assume that a radiologist group practice has the following cost structure: Fixed costs $500,000 Variable cost...

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Assume that a radiologist group practice has the following cost structure: Fixed costs $500,000 Variable cost...

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

Fixed costs	$500,000
Variable cost per procedure	$25
Charge (price) per procedure	$100

Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.

Part A

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

b. What is the group’s contribution margin?

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

d. What volume is required to provide a pretax profit of $100,000?

Part B

a. Complete the following table

Volume	Revenue	Fixed Costs	Variable Costs	Total Costs	Average Cost
0
500
1,000
1,500
2,000
2,500
3,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000

b. Describe the relationship between volume and average cost in this particular cost structure. Please explain.

c. Sketch out a CVP analysis graph depicting the base case situation. (Hint: use Excel to produce the sketch. When done, copy/paste the sketch below).

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