Assume that the managers of the Fort Winston Hospital are setting the price on a new Outpatient service. Here are the relevant data estimates:
Variable Cost Per Visit $5.00
Annual Direct fixed Cost $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? 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 in the problem. Again repeat Part a, but assume that direct fixed costs are $1.000,000.
d. Repeat Part a assuming both a $10. Variable cost and $1,000,000 in direct fixed costs.