Assume that a radiologist group practice has the following cost structure:

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 accounting breakeven point?

c. What volume is required to produce a pretax profit of $100,000?
A pretax profit of $200,000?

d. Sketch out a CVP analysis graph depicting the base case situation.
Now assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Answer questions

a, b,

c, and d under these conditions.

Transcribed Image Text:

Fixed costs $500,000 Variable cost per procedure 25 Charge (revenue) per procedure 100