Dr$.$ Steven Smith is a cardiologist who owns a profitable practice in the Bronx. He is contemplating adding a gym to his practice within the same building that houses his medical practice. This building has finished areas in the basement that can be converted to a gym. The gym will specialize in cardiac programs for the clients who are using this cardiology practice.

Dr$.$ Smith has hired you to determine whether this idea will be profitable for the practice based on the cost and how many clients he will need to break even. Break$-$even analysis is the method for determining the number of units $($clients$)$ needed to recoup the fixed and variable costs.

Use the following monthly values to calculate the expenditures:

MONTHLY EXPENSES

Electricity

$$250$

Heat

$$350$

Rent

$$1,500$

Insurance

$$2,000$

Supplies

$$1,000$

Use the following yearly$/$one$-$time values to calculate the expenditures:

YEARLY$/$ONE TIME EXPENDITURES

Salaries

$$240,000$

$($annual pay$/$assume $4$ employees$)$

Gym Equipment purchase

$$7,200$

$($assume $6$ items @ $$1200/$item$-$treadmill, elliptical, weights, bicycle$)$

Advertising budget

$$10,000$

$($yearly$)$

Computers

$$5,000$

$($assume $5)$

Part A: Please answer the following questions:

To obtain the information that is required for this project, the following must be considered:

$1.$ What will the gym equipment cost to purchase and install?

$2.$ How many professional staff will be needed based on the number of clients?

$3.$ What is the cost of the professional staff for this business?

$4.$ What will electricity, insurance, heat, etc. cost monthly?

$5.$ What is the one time cost of computer equipment, office supplies?

Part B: Include the following in a spreadsheet format:

$1.$ Estimated revenue per client. $($This includes the cost per visit to the gym and the number of times they will visit the gym each month; assume $3$ visits per week$).$

$2.$ Calculate the monthly fixed and variable costs.

$3.$ Based on the expenses listed, and the possible revenue from clients, how many clients will you need to break even on this business?

Answer rating: 100% (QA)

To calculate the profitability of Dr Smiths gym venture we need to consider various factors ... View the full answer