Eric runs a chiropractic center in Mililani. The annual ? xed costs for operating Chiro-Care clinic is $222,000. The variable cost per patient treated is $55. The price billed for each visit is $136. Currently, he has around 2500 visits a year.
a. Is he making a pro? t?
b. He doesn't think he can increase demand, so he is thinking about a cost-cutting measure for his
variable costs. What would his variable costs need to be in order for him to break even at 2500
visits a year?
John is thinking about getting into the tourism business in Oahu. He will take visitors on a whole-day trip to the main tourist spots on the island in a new van he is planning to buy. He would like to know how many tourists he has to move daily to have a before-taxes pro? t of $1000 per month so he can save that money. He will work 25 days per month.
His costs for the new business would be as follows:
Variable costs per day trip
Gasoline: $ 30
Maintenance: $ 5 (oil, tune-ups, wheels, repairs, etc.)
Fixed costs
Leasing and insurance: $ 1000 per month
Personal expenses: $1000 (the minimum amount he needs for living expenses) per month
He is planning to charge $ 45 per visitor for a day trip.Using the break-even formula, John will need how many daily travelers in order to achieve a pro?t of $1000 per month?