I really need help with this question please
Break-even equation. Fill in the blank. The following table contains selected data concerning several outpatient clinics in the new Ambulatory Care Center at Hope University Hospital. Fill in the missing information.
A. PRICE PER VISIT: $85, $70, blank $65
B. VARIABLE COST/VISIT: blank $20, $35, $40
C. NUMBER OF VISITS: 3,000, blank 3,250, 2,000
D. CONTRIBUTION MARGIN: $180,000, $130,000 blank blank
E. FIXED COSTS: blank $90,000 $78,000, $60,000
F. NET INCOME: $80,000 blank $117,000 blank
what role does the contribution margin have? Disregarding that, we'd have
C*A = (B+E)*C+F
Not sure which side of the equation D goes on.
Left = revenue
Right = cost
To fill in the missing information in the table, we can use the break-even equation:
Contribution Margin = (Price per Visit - Variable Cost per Visit) x Number of Visits
Let's calculate the missing values step by step:
A. PRICE PER VISIT: $85, $70, blank, $65
Based on the table, the price per visit is decreasing from $85 to $70. So, the missing value should be less than $70. Let's calculate it:
Contribution Margin = ($70 - Variable Cost per Visit) x 3,250 visits
Contribution Margin = $130,000 (given)
$130,000 = ($70 - Variable Cost per Visit) x 3,250
Variable Cost per Visit = ($70 x 3,250 - $130,000) / 3,250
Variable Cost per Visit = $227,500 / 3,250
Variable Cost per Visit ≈ $70.00
So, the missing value is $70.
B. VARIABLE COST/VISIT: blank, $20, $35, $40
Based on the table, the variable cost per visit is increasing from an unknown value to $20. So, the unknown value should be less than $20. However, we have already calculated the missing value in part A. Therefore, the missing value should be $70.
C. NUMBER OF VISITS: 3,000, blank, 3,250, 2,000
Based on the table, the number of visits is decreasing from 3,000 to 2,000. So, the missing value should be less than 3,000 and greater than 2,000. However, we have already calculated the missing value in part A. Therefore, the missing value should be 3,250.
D. CONTRIBUTION MARGIN: $180,000, $130,000, blank, blank
We have already calculated the contribution margin in part A. So, the missing value should be $180,000.
E. FIXED COSTS: blank, $90,000, $78,000, $60,000
We can find the fixed cost by using the break-even equation and substituting the known values:
Contribution Margin = (Price per Visit - Variable Cost per Visit) x Number of Visits - Fixed Costs
$180,000 = ($70 - $20) x 3,250 - Fixed Costs
$180,000 = $50 x 3,250 - Fixed Costs
$180,000 + Fixed Costs = $162,500
Fixed Costs ≈ $17,500
So, the missing value is $17,500.
F. NET INCOME: $80,000, blank, $117,000, blank
We can find the net income by using the formula:
Net Income = Contribution Margin - Fixed Costs
Net Income = $180,000 - $17,500
Net Income ≈ $162,500
So, the missing value is $162,500.
The completed table is as follows:
A. PRICE PER VISIT: $85, $70, $70, $65
B. VARIABLE COST/VISIT: $70, $20, $35, $40
C. NUMBER OF VISITS: 3,000, 3,250, 3,250, 2,000
D. CONTRIBUTION MARGIN: $180,000, $130,000, $180,000, $180,000
E. FIXED COSTS: $17,500, $90,000, $78,000, $60,000
F. NET INCOME: $80,000, $162,500, $117,000, $162,500
To solve this problem, we need to understand the concept of the break-even point. The break-even point is the level of sales at which total revenue equals total costs, resulting in zero profit or loss.
The contribution margin is the difference between the selling price per unit and the variable cost per unit. It represents the amount that contributes towards covering fixed costs and generating profit.
To find the missing information, we can use the break-even equation:
Contribution Margin × Number of Visits = Fixed Costs
Let's calculate the missing values step by step:
1. Calculate the contribution margin for the blank in section D:
Contribution Margin = Total Contribution Margin / Total Number of Visits
For the available data in section D, we can calculate the contribution margin as:
$180,000 / 3,000 = $60
So, the missing value in section D is $60.
2. Calculate the fixed costs for the blank in section E:
Fixed Costs = Contribution Margin × Number of Visits
For the available data in sections D and C, we can calculate the fixed costs as:
$60 × 3,250 = $195,000
So, the missing value in section E is $195,000.
3. Calculate the net income for the first blank in section F:
Net Income = Contribution Margin × Number of Visits - Fixed Costs
For the available data in sections D, C, and E, we can calculate the net income as:
$60 × 3,000 - $195,000 = $45,000
So, the missing value in the first blank of section F is $45,000.
4. Calculate the net income for the second blank in section F:
For the available data, we can calculate the net income as:
$60 × 2,000 - $195,000 = -$75,000
So, the missing value in the second blank of section F is -$75,000.
Now, we can fill in the missing values:
A. PRICE PER VISIT: $85, $70, $75, $65
B. VARIABLE COST/VISIT: $20, $35, $40
C. NUMBER OF VISITS: 3,000, 3,250, 2,000
D. CONTRIBUTION MARGIN: $60, $60, $60
E. FIXED COSTS: $195,000
F. NET INCOME: $45,000, -$75,000
Please note that these calculations assume linearity and do not account for other costs or revenue factors that may affect the actual break-even point.