K L M B C D E F G 1 1 Assume that managers of Last Hope Hospital are setting the price on a new outpatient service. Here are relevant data 2 estimates: 3 4 Variable cost per visit $ 38 $ 42 5 Annual Direct Fixed Costs $ 950,000 6 Annual Overhead Allocation $ 275,000 7 Expected Annual Utilization - Visits 28,000 8 a. 1). What per visit price must be set for the service to reach accounting breakeven? 2). What per visit price must be set to earn an annual profit of $200,000? 9 10 Profit = TR - TC Profit = TR - TC = P*V - (VC*V+FC+ OH) 11 P= (Profit + TC) / V 12 13 1) $ 81.75 $ 2,289,000 $ 81.75 14 15 2) $ 88.89 $ 200,000.00 $ 88.89 b. Repeat Part a, but assume that the variable cost per visit is $42. 16 17 TC $ 2,401,000 18 19 1) $ 85.75 85.75 20 2) $ 92.89 21 22 23 24 25 26