Assume that the managers of Kaibab Hospital are setting the price on a new outpatient service. Her are relevant data estimates:
Variable cost per visit $7.00
Annual Direct fixed costs $500,000
Annual overhead allocation $50,000
Espected annual utilization 10,000 visits
a. What per visit price must be set for the service to break even? To earn an annual profit of $100,000?
b. Repeat part a, but assume that the variable cost per visit is $10.
c. Return to the data given above. Again, repeat part a, but assume the direct fixed costs are $1,000,000.
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