The XYZ Clinic has fixed costs of SR 250,000 per annum, its average fee per patient visit is SR 95, its variable costs per patient visit are SR80 and it has a maximum capacity of 12,000 patient visits per year. Please solve the below mentioned question:


i. On the basis of these figures what profit or loss is the Clinic making per year if it is at its maximum capacity of 12,000 patient visits? What profit or loss would it make with 10,000 patient visits per year?

ii. How much would the Clinic have to charge per patient visit to break even at its maximum capacity of 12,000 patient visits - assuming fixed costs and variable costs remain unchanged?

iii. Studies have shown that if the Clinic raises its fee above SR95 per patient visit, demand would be dramatically lower. Keeping patient fees at SR95, variable costs per patient at SR80 and patient visits at 12,000 per year, what is the most the Clinic could spend on fixed costs to break even?

iv. After further study, the Clinic determines that it can cut fixed costs to SR200,000 per year, but no lower. If fees are kept at SR95 per visit, the volume of patients is 12,000 per year and fixed costs are SR200,000 per year, how much can the Clinic spend on variable costs per patient and still break even?

v. After many committee meetings the Clinic's managers decide to raise the fee per visit to SR100, lower fixed costs to SR200,000 and keep variable costs at SR80 per visit. How many visits do they need to break even? Is this achievable, and what profit would be made if there are 12,000 patient visits?

Answer rating: 100% (QA)

Break Even Point Break even is that point of sale where total cost is equal to total revenue or we can say on break even point business has no loss no profit i Part 1 Calculation of Profit or Loss mak... View the full answer