Nr533 Week 5: Break-even Analysis Assignment
Purpose
The purpose of this Nr533 Week 5: Break-even Analysis assignment is to provide learners with the opportunity to develop break-even-analysis skills.
Requirements:
Answer the questions and complete the calculations required for the assignment.
Submit your answers on a Word document,with the heading of Week 5Assignment. For the questions requiring a written response, please adhere to proper grammar and syntax, and provide references. For the questions requiring calculations, show all your work and follow the format that has been provided for the calculations in the lesson for Week 5.
Preparing the paper
Break-Even Analysis Case Study
You and several of your colleague business partners have decided to establish an outpatient fertility clinic in your service area. All of you are very familiar with this patient population base, have completed an extensive market analysis thatdemonstrated a great need for the service, and are comfortable with setting up a business and the costs associated with this special group of patients.
As part of the business plan, you and your partners will need to convince stakeholders that this new service endeavor will be viable. They will want to know how many patient visitswill need to occur annually and how long it will take for the service to be at least cost neutral or profitable. To provide them with this information you will perform a break-even analysis. Use the following data and conduct the analysis accounting for the contribution margin of each patient acuity category.
- Fixed Costs: $9,788,000 (start-costs, specialty physicians, anesthesiologists, APNs, staff
nurses and other staff salaries, specialty equipment, other miscellaneous)
- Variable costs: $500/patient visit (specialty equipment, oxygen supplies, other
miscellaneous)
- Clinic days: Monday–Saturday—312 days/year
- Projected patient visits per year: 7488
- Patient charges by patient acuity category:
- Simple (15%)————$2,000/visit
- Moderate (60%)——–$6,500/visit
- Complex (25%)———$10,000/visit
- Describe your approach to this Case Study. In addition to the numbers given, what do you need to know before you can calculate the break-even analysis?
- Perform the calculations needed for the break-even analysis. Show your work, formulas used, and reference the formula. When calculating the patient visits per day, round to the nearest whole number. After you’ve completed the calculations, record your results in the appropriate place in the table.
| Break-even Analysis Data Table | ||||||||
| Acuity Category | Percentage % | Charge per Visit | Visits per Year | Charges per Year | Visits per Day | Charges per Day | Contribution Margin | |
| Simple | 15% | $2,000 | ||||||
| Moderate | 60% | $6,500 | ||||||
| Complex | 25% | $10,000 | ||||||
| Expected Total Daily Charges | ||||||||
| ExpectedTotal Daily Revenue | ||||||||
| Break Even point in days | ||||||||
| Break Even point in visits | ||||||||
- How many patient visits are expected per day?
- What is the contribution margin of each category of patient?
- Based on the data and your calculations, what is the expected daily revenue?
- How long (in days, months, or years) will it be before the return on investment begins?
- How many patient visits will be required to reach the break-even point?
- Discuss your analysis. Is the project viable and profitable service? Does the analysis support moving forward with the business? Cite specific data from you analysis to support your interpretation.
Nr533 Week 5: Break-even Analysis Answer
Approaching this Case Study involves recognizing the pivotal role of break-even analysis, a critical tool for assessing the economic feasibility of ventures like the outpatient facility clinic under consideration. As outlined by Noreen et al. (2014), the break-even point signifies the juncture where revenues equal costs, elucidating the number of units an organization must produce to cover operational costs and achieve a specified profit.Nr533 Week 5: Break-even Analysis
In order to conduct an effective break-even analysis for the outpatient facility clinic, it is imperative to gather key information, including fixed costs, variable costs per unit, and the selling price per unit. This data is instrumental in calculating the contribution margin and determining the break-even point. In the present case, this information has been utilized not only to calculate the expected number of patients per day but also to derive the contribution margin for each category, anticipate daily revenues, ascertain the duration required to achieve return on investment, and identify the number of patients needed to reach the break-even point.Nr533 Week 5: Break-even Analysis
By delving into these crucial factors, the break-even analysis becomes a comprehensive tool, providing insights into the financial viability and sustainability of the outpatient facility clinic. It serves as a compass, guiding strategic decision-making and offering a clear understanding of the operational dynamics required to achieve financial equilibrium and eventual profitability.Nr533 Week 5: Break-even Analysis
References:
Noreen, E., Brewer, P., & Garrison, R. (2014). Managerial Accounting for Managers. McGraw-Hill Education.
