Problem 2
You are considering starting a walk-in clinic. Your financialprojections for the first year of operations are as followsâ
Revenues (10,000 visits)
$400,000
Wages and benefits
220,000
Rent
5,000
Depreciation
30,000
Utilities
2,500
Medical supplies
50,000
Administrative supplies
10,000
Assume that all costs are fixed, except medical supplies andadministrative supplies, which are variable. Furthermore, assumethat the clinic must pay taxes at 30 percent rate.
a. Construct the clinicâs projected P&L statement.
EXPENSES AMOUNT INCOME AMOUNT
Wages and benefits 220,000 revenue 400,000
Rent 5,000
Depreciation 30,000
Utilities 2,500
MedicalSupplies 50,000
Administrative Supplies 10,000
Profit 82,500
TOTAL 400,000 400,000
Profit = 82,500
Tax -24,750
$57,750
b. What number of visits is required for break-even? (Hint: Atbreakeven, there is zero taxable income and hence zero taxes).
Break even point = fixed cost/cont pu
= 257,500/34
= 7573.52
= 7574 visits
c. What number of visits is required to provide you with anafter-tax profit of $100,000?
Profit before tax = (100,000/70) x 100
= 142,857
Number of visits required = fixed cost + profit before tax/contpu
= 257,500 + 142,857/34
= 11,775 visits
Problem 3
Burleson Clinic has fixed costs of $2,000,000 and an averagevariable cost rate of $15 per visit. Its sole payer, an HMO, hasproposed an annual capitation payment of $150 per each of its20,000 members. Past experience indicates the population servedwill average two visits per year.
a. Construct the base case projected P&L statement on thecontract.
Problem 2
You are considering starting a walk-in clinic. Your financialprojections for the first year of operations are as followsâ
Revenues (10,000 visits) | $400,000 |
Wages and benefits | 220,000 |
Rent | 5,000 |
Depreciation | 30,000 |
Utilities | 2,500 |
Medical supplies | 50,000 |
Administrative supplies | 10,000 |
Assume that all costs are fixed, except medical supplies andadministrative supplies, which are variable. Furthermore, assumethat the clinic must pay taxes at 30 percent rate.
a. Construct the clinicâs projected P&L statement.
EXPENSES AMOUNT INCOME AMOUNT
Wages and benefits 220,000 revenue 400,000
Rent 5,000
Depreciation 30,000
Utilities 2,500
MedicalSupplies 50,000
Administrative Supplies 10,000
Profit 82,500
TOTAL 400,000 400,000
Profit = 82,500
Tax -24,750
$57,750
b. What number of visits is required for break-even? (Hint: Atbreakeven, there is zero taxable income and hence zero taxes).
Break even point = fixed cost/cont pu
= 257,500/34
= 7573.52
= 7574 visits
c. What number of visits is required to provide you with anafter-tax profit of $100,000?
Profit before tax = (100,000/70) x 100
= 142,857
Number of visits required = fixed cost + profit before tax/contpu
= 257,500 + 142,857/34
= 11,775 visits
Problem 3
Burleson Clinic has fixed costs of $2,000,000 and an averagevariable cost rate of $15 per visit. Its sole payer, an HMO, hasproposed an annual capitation payment of $150 per each of its20,000 members. Past experience indicates the population servedwill average two visits per year.
a. Construct the base case projected P&L statement on thecontract.
