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    Break Even Point in Total Revenue

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    Children's hospital predicts variable costs of 70% of total revenue and fixed costs of 42 million per year for 2011

    1. Compute the break even point expressed in total revenue

    2. In 2011 Children's hospital expects a total revenue of $1.5 million from 200,00 patients. Compute (a) expected profit for 2011 if costs behave as expected, and (b) total profit if variable costs in 2011 are 10% greater than predicted.

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    Solution Preview

    1. Breakeven point in total revenue = Fixed cost/contribution margin ratio
    Fixed cost = $42 million
    Contribution margin ratio = 1-variable ...

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