1) Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates:
Variable cost per visit $5.00
Annual Direct Fixed Costs $500,000
Annual overhead Allocation $50,000
Expected Annual Utilization (visits) 10,000
a. What per visit price must be set for the service to break even? To earn 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 report Part A, but, assume the direct fixed costs are $1,000,000.