Dr. Hughes and Dr. Hawkins, owners of the Spanish Fork Care Clinic, have $350,000 of fixed costs per year. They receive 30,000 patient visits in a year, charging each patient an average of $25 per visit; variable costs average $3 per visit (needles, medicines, and so on). 1. What is the contribution margin per patient visit? 2. What is the

Chapter 21, Practice Exercises #32

Dr. Hughes and Dr. Hawkins, owners of the Spanish Fork Care Clinic, have $350,000 of fixed costs per year. They receive 30,000 patient visits in a year, charging each patient an average of $25 per visit; variable costs average $3 per visit (needles, medicines, and so on).

1. What is the contribution margin per patient visit?

2. What is the total contribution margin per year?

3. What is the total pretax profit for a year?

4. Drs. Hughes and Hawkins can bring in another doctor at a salary of $100,000 per year.

If this new doctor can handle 5,000 patient visits per year, should the new doctor be hired? (Assume no additional fixed costs will be incurred.)

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...