Question: Assume that the managers of a hospital are setting the price on a new outpatient service. Here are relevant data estimates [1]:
Variable cost per unit $5.00
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected annual utilization 10,000 visits
a. What per visit price must be set for the service to break even?
b. What per visit price must be set for the service to earn an annual profit of $100,000?