Question:
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 utilization10,000
1. What per-visit price must be set for the service to break even? Toearn an annual profit of $100,000?
2. Repeat Part a, but assume that the variable cost per visit is $10.
3. Return to the data given in the problem. Again repeat Part a, but assume that direct fixed costs are $1,000,000.
4. Repeat Part a assuming both $10 in variable cost and $1,000,000 in direct fixed costs.