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 10,000
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 $10 in variable cost and $1,000,000 in direct fixed costs.