Purpose
The purpose of this assignment is to:
To provide learners with the opportunity todevelop break-even-analysisskills.
Due Date: Sunday 11:59 PM MT at the end of Week6
Total Points Possible: 100
Requirements:
Answer the questions and complete the calculations required for the assignment.
Submit your answers on a Word document,with the heading of Week 6Assignment. For the questions requiring a written response, please adhere to proper grammar and syntax, and provide references. For the questions requiring calculations, show all your work and follow the format that has been provided for the calculations in the lesson for Week 6.
Preparing the paper
Break-Even Analysis Case Study
You and several of your colleagues business partners have decided to establish an outpatient fertility clinic in your service area. All of you are very familiar with this patient population base, have completed an extensive market analysis thatdemonstrated a great need for the service, and are comfortable with setting up a business and the costs associated with this special group of patients.
The outpatient fertility clinic will have a fixed cost of $9,788,000 —start-up costs, hiring of specialty physicians, anesthesiologists, advanced practice nurses and staff nurses, salaries, purchase of high-technology fertility equipment, and other miscellaneous items.
The fertility clinic will be open Monday through Saturday; 312 days per year.
The fertility outpatient clinic has variable costs of $500 per patient visit —fertility medical equipment, oxygen supplies, and other miscellaneous items.
Each patient will be charged the following per visit based on patient acuity categories:
- Simple 15% = $2,000
- Moderate 60% = $6,500
- Complex 25% = $10,000
The projected patient visits per year are anticipated to be 7,488 visits. How many patients would the clinic have to provide services for to break even, and at what point would this occur?
What is your interpretation of the break-even analysis? Is this project a viable and profitable service? Does the break-even analysis support moving forward with this business? Why, or why not?
| Category | Points | % | Description |
| Calculate the contribution margin for each type of patient served at the fertility clinic. | 15 | 15% | Please include the description of the criterion |
| Calculate the total weighted average contributing margin.
|
15 | 15% | |
| Calculate the break-even quantity (number of visits). | 15 | 15% | |
| Calculate the number of patients served per day. | 15 | 15% | |
| Calculate the number of days to break-even. | 15 | 15% | |
| Analysis of break-even analysis | 25 | 25% | |
| 100 | 100 | A quality assignment will meet or exceed all of the above requirements. |
Solution:
Break-Even Analysis
Understanding of Break-Even Analysis
The break-even analysis is a fundamental concept in a business environment that illustrates a point whereby a firm makes neither a profit nor a loss in its operations. At a break-even point, the cost of production equates with the revenue derived from sales, a situation that assists the firm to identify the appropriate output level required to cover the operating cost (McGee, 2015). The break-even analysis is widely useful in costing and production management since it crucially helps in identifying those factors that affects the profit and loss realization (McGee, 2015). In a healthcare setup, breakeven analysis simply identifies the point at which a particular facility can anticipate to recover an investment cost. For instance, a healthcare fertility clinic can determine the units to be sold in covering the production cost to start making profit. However, it is more important to determine the number of units necessary to breakeven in order to anticipate the period it will take to realize a profit.
Calculation of Break-Even Analysis (Fertility Clinic)
To calculate the number of patients the clinic requires in offering services to break -even, it will be important first to determine the contributing margin.
Therefore, the contribution margin of each of the fertility clinic’s patient category would be, (Patient cost – variable cost of per patient visit)
| Patient category | Price | Variable Cost | Contributing Margin |
| Simple | $2000 | $500 | $1500 |
| Moderate | $6,500 | $500 | $6,000 |
| Advanced | $10,000 | $500 | $9,500 |
The weighted average combination margin would be, (percentage visits X contribution margin)…..Please click the icon below to purchase full solution at $10