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Accounting:Cost-volume-profit analysis.

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Assume the following:

Sales of 5000 units per month
Price of $12.50 per unit
Revenue of $62,500
Variable Cost of $6.00 per unit
Fixed Costs of $15,000

In all parts, show your formulas and work.

Part A: Explain what happens with a 5% price increase to revenue, variable costs, contribution to margin, fixed costs and the wholesale price assuming sales stay constant. State your answer in $.
Part B: What is the breakeven sales change in units and dollars with a 5% price increase? Explain the effect on profitability at, above and below the breakeven sales change.
Part C: What is the breakeven sales change, in units, for an increase in variable costs equal to $.22 with a 5% price increase? Explain the effect on profitability at, above and below the breakeven sales change.
Part D: What is the breakeven sales change, in units, for a fixed cost increase of $1,000 each month with a 5% price increase? Explain the effect on profitability at, above and below the breakeven sales change.

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Solution Summary

The problem set deal with issues in accounting: cost-volume-profit analysis.

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Healthcare finance, cost-volume-profit, management accounting

Consider the CVP graphs below for two providers operating in a fee-for-service environment: see attached file

a. Assuming the graphs are drawn to the same scale, which provider has the greater
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c.Which provider needs the higher volume to break even?
d. How would the graphs change if the providers were operating in a discounted fee-for-
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Consider the data in the following table for three independent healthcare organizations: (see file)

Total Fixed Total
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a. $2,000 $1,400 ? $2,000 ?
b. ? 1,000 ? 1,600 $2,400
c. 4,000 ? $600 ? 400
Fill in the missing data indicated by question marks.
5.6 Assume that a radiology group practice has the following cost structure:
Fixed costs $500,000
Variable cost per procedure 25
Charge (revenue) per procedure 100
Furthermore, assume that the group expects to perform7,500 procedures in the coming
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b.What is the group's contribution margin?What is its break-even point?
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