Profit, charges, and break-even without and with overhead. A number of years ago, at the request of its employees, Jack Winslow and Company converted one of its small rooms to house a small pharmacy for its employees in which they can buy a few popular prepackaged drugs. JWC only wants to break even on this service. Total cost of operating the pharmacy per year is $24,000: $1,000 a month for the contractor who operates the pharmacy and the remainder in drug costs. JWC charged $25 a month to each of 500 employees who participated last year.
• How much did the company make or lose during the year?
• In setting its rate for the coming year, how much would JWC have to charge per participating employee if it expects to break even? It estimates 500 employees per year will use this service.
• What if JWC also wants these employees to cover the estimated $100 overhead per month the pharmacy space costs?
• What would JWC have to charge if it expects drug costs to increase 10 percent per employee?