Assume that a radiologist group practice has the following cost structure:
Fixed costs $500,00
Variable cost per procedure $25
Charge (revenue) per procedure $100
Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.
a. Construct the group's base case projected P&L statement.
b. What is the group's contribution margin? What is its breakeven point?
c. What volume is required to provide a pretax profit of $100,000? Aoretax profit of $200,000?
d. Sketch out a CVP analysis graph depicting the base case situation.
e. Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Redo questions a, b, c under these conditions.