Cost Behaviour and Profit Analysis Student`s
COST BEHAVIOUR AND PROFIT ANALYSIS 1
CostBehaviour and Profit Analysis
Question 5.4 General Hospital


  
A statement projected profit and loss 

  
$ 

Sales (Revenue) 
15,000 visits 
15,000,000 
Variable Cost 
3,000,000 

Contribution 
12,000,000 

Administrative expenses (FC) 
10,000,000 

Surplus 
  
2,000,000 

Let the Q* be the number of inpatients at breakeven. At BEP, the firm makes no profit. That is, TR=TC
Q*=FC/(PVC)
10000000/(1000200) = 12500 units
Thereforethe hospital needs to have 12,500 visits for them to breakeven

Profit, P = Revenue – (FC + VC)
Letthe total visits per day be Q
$1,000,000= {($1,000 × Q) – ($10,000,000 + 200Q)}
11000000=800Q

Q= 13750
Thefirm will need to have 13750 inpatients for them to make a profit of1,000,000
$500,000= {($1,000 × Q) – ($10,000,000 + 200Q)}
10500000=800Q

Q= 13125 inpatients
Thefirm will need to have 13125 inpatients for them to make a profit of500,000
Question5.5
a)
Clinic`s projected profit and loss statement 

  
$ 

Revenues 
10000 visits 
400,000 

Medical supplies 
50,000 

Administrative supplies 
10,000 

Contribution 
340,000 

Wages and benefits 
220,000 

Rent 
5,000 

Depreciation 
30,000 

Utilities 
2,500 

Earning before Tax 
82,500 

Tax @30% 
24,750 

Earnings After Tax 
  
57,750 
b)Breakeven analysis
AtBEP, Profit p, = 0 this implies that, total cost TC= total revenue TR
Q*=FC/ (PVC)
257500/(4336) = 7574 visits
Therefore,the new clinic needs to have 7574 visits for it to be at breakevenpoint

After tax 100,000
Earningbefore tax = 100000*100/70= 142857
Profit,P = Revenue – (FC + VC)
$142857.1429= {($40 × Q) – ($257500 + 6Q)}
$400357=34Q

Q= 11775 visits
Thefirm will need to have 11775 inpatients for them to make an after taxprofit of $100,000
References
CarlWarren, James Reeve, Jonathan Duchac, (2015).Accounting,Cengage Learning Publisher.