Determine the breakeven volume of injections for 2016 using the following formula for the contribution margin ratio
Fantastic news! We've Found the answer you've been seeking!
Question:
Determine the breakeven volume of injections for 2016 using the following formula for the contribution margin ratio approach: Breakeven revenue = Total fixed costs + [(Total variable costs / Total revenue) × Breakeven revenue].
2. Dr. Brandon would like an after-tax net income of $200,000. What volume of injections will be necessary to obtain the desired income? How many injections per day will this be, based on 250 working days per year?
3. Compute the likely 2016 operating leverage, and briefly explain to Dr. Brandon why his net income has increased at a faster rate than his revenues. (Hint: Degree of operating leverage = Total contribution margin / Profit.)
Transcribed Image Text:
Case 9.5: Immunization Clinic Inc. Key concept: Determining volume to achieve target profit for a taxable entity D r. Brandon started a for-profit immunization clinic in January 2013. The clinic was founded with the vision of providing five types of immunization injections for a low price of $10 each, with the aim of making them affordable to all. Immunization Clinic Inc. is located in a small building rented at a cost of $1,000 per month. The clinic hired one nurse to work full-time and two college students to work 20 hours per week. A certified public accountant (CPA) also was hired at a cost of $1,000 per month to handle billings, collections, payroll, payments, financial records, monthly financial statements, and tax returns. Necessary equipment was purchased for cash. Dr. Brandon has noticed that expenses for medical supplies and advertising have varied while the remaining expenses have been relatively constant. Between 2013 and 2015, the patient volume doubled. Profits have much more than doubled. Dr. Brandon does not understand why profits have gone up so much faster than patient volume. The CPA prepared the following forecasted income statement for 2016: Revenues Expenses Immunization Clinic Inc. Projected Income Statement for Year Ended December 31, 2016 Total expenses Income before income taxes Income tax expense Net income Medical supplies Physician salary Nurse salary Hourly wages Payroll taxes-benefits Rent Professional fees Equipment depreciation Utilities Advertising Miscellaneous expenses $160,000 60,000 40,000 20,000 36,000 12,000 12,000 5,000 6,000 20,000 15,000 $480,000 386,000 94,000 23,500 $70,500 Case 9.5: Immunization Clinic Inc. Key concept: Determining volume to achieve target profit for a taxable entity D r. Brandon started a for-profit immunization clinic in January 2013. The clinic was founded with the vision of providing five types of immunization injections for a low price of $10 each, with the aim of making them affordable to all. Immunization Clinic Inc. is located in a small building rented at a cost of $1,000 per month. The clinic hired one nurse to work full-time and two college students to work 20 hours per week. A certified public accountant (CPA) also was hired at a cost of $1,000 per month to handle billings, collections, payroll, payments, financial records, monthly financial statements, and tax returns. Necessary equipment was purchased for cash. Dr. Brandon has noticed that expenses for medical supplies and advertising have varied while the remaining expenses have been relatively constant. Between 2013 and 2015, the patient volume doubled. Profits have much more than doubled. Dr. Brandon does not understand why profits have gone up so much faster than patient volume. The CPA prepared the following forecasted income statement for 2016: Revenues Expenses Immunization Clinic Inc. Projected Income Statement for Year Ended December 31, 2016 Total expenses Income before income taxes Income tax expense Net income Medical supplies Physician salary Nurse salary Hourly wages Payroll taxes-benefits Rent Professional fees Equipment depreciation Utilities Advertising Miscellaneous expenses $160,000 60,000 40,000 20,000 36,000 12,000 12,000 5,000 6,000 20,000 15,000 $480,000 386,000 94,000 23,500 $70,500
Expert Answer:
Answer rating: 100% (QA)
1Since only medical supplies and advertising have varied down the years we can say thes... View the full answer
Posted Date:
Students also viewed these accounting questions
-
Please provide the answers in excel with formulas and explanation. Revenues: 2019 2020 Net Patient Service Revenue $1,400 $1,200 Other Revenue 200 200 Total Revenues 1,600 1,400 Expenses: Nursing...
-
Please provide the answer in excel with the formulas and explain he steps. The are three questions below. The bullets are the information needed to answer and solve the questions. Medical Center...
-
What software and hardware infrastructure will be necessary to ensure Personal Trainer can process point of sale transactions?
-
Show that is one-to-one and find f(x) = J2 1 + 1 dt
-
Rogers and Prentice-Dunn (1981) had 96 white male undergraduates deliver shocks to their fellow subjects as part of a biofeedback study. They recorded the amount of shock that the subjects delivered...
-
Show why the weight of a concrete shaft liner that is poured to the walls of the unlined shaft is not important to liner stress
-
Match the following concepts to their descriptions: 1. Document specifying when jobs will be manufactured. 2. Product costing system used by mass manufacturers. 3. Bill from supplier. 4. Document...
-
1. Design a code scheme that will meet the marketing managers stated requirements. 2. Suggest a code scheme that will identify each Western Wear customer. 3. Suggest a code scheme that will identify...
-
2. 42. 33 43 A. B. Which of the above atoms belong to inert element R S C. T D. U A. If atom R belong to element R ant atom V belong to element V, what would be the formula of the compound formed...
-
Which federal act assists workers who are displaced through no fault of their own? Multiple Choice O O HIPAA FUTA SUTA ERISA
-
The Three companies are (Wells Fargo, Barclays, J.P. Morgan) Assignment's Instructions: -Pick three publicly traded companies (corporations) and compare them based on your role (you have to mention...
-
You have been given the following projections for A&J Limited: _ 7 Year 1 2 3 4 5 ' Free cash flow of the firm 400 460 540 620 620 lntcrest-bearing debt 750 700 600 500 700 Interest expense 100 85 74...
-
Where do we get the numbers in green from, what is the formula; Sales COGS Gross Profit S&A expenses Income from operations Graphic Design Income Statement $ 69 69 69 69 69 69 69 69 $ $ $ Interest...
-
7 Requirements: 8 1) Using the data below, create a multi-step GAAP Income Statement in appropriate professional Excel format (i.e., use cell referencing and formulas, no hard coding numbers). 92)...
-
Suppose in the far-field for a particular antenna at the origin, the electric field is Es = nolo e-jr a. Make a draw of the electric field in Cartezian coordinate system -sin ea.
-
E&A Industries is planning an issue of 10-year, $1,000 par value zero coupon bonds to generate cash for a planned acquisition. If the YTM on the bonds will be 6.2% (assume semiannual compounding) and...
-
You lend Jack $18,000 and he agrees to repay you in equal year-end amounts over 5 years. If the interest rate is 9.2% per annum compounded quarterly, the annual repayment will be (rounded to nearest...
-
Prepare a stock card using the following information A company is registered for GST which it pays quarterly, assume GST was last paid on the 30th of June 2019. It uses weighted average cost...
-
First-Year College GPA Researchers at the College Board wanted to build a model that describes one's first-year college GPA. The researchers obtained the following model: \[\hat{y}=0.06 x_{1}+0.07...
-
Suppose we record the gender of the 15 students enrolled in an introductory statistics course as they enter the classroom. The males are denoted by a blue M and the females are denoted by a red...
-
A nutritionist wants to develop a model that describes the relation between the calories, total fat content, protein, sugar, and carbohydrates in cheeseburgers at fast-food restaurants. She obtains...
Study smarter with the SolutionInn App