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Fixed Cost, Variable Cost - Contribution Margin; Total Revenue

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A city health clinic treats two types of patients: 1) those with physical problems and 2) those with mental health problems. The revenues and costs associated with each type of patient are attached.

Fixed costs are expected to be $2,000.

a. What is the contribution margin for each type of patient?
b. If out total revenue is capped at $12,000, what mix of patients yields the best financial result?
c. If we have capacity for 350 patients in total, what mix of patients is financially most attractive?
d. We currently have 100 of each type of patient. If we want to attract additional patients, and our marketing costs are $5 to attract each additional physical patient, and $6 to attract each additional mental health patient, where should our marketing efforts go?

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A city health clinic treats two types of patients: 1) those with physical problems and 2) those with mental health problems. The revenues and costs associated with each type of patient are as follows:

Physical Mental
Average revenue received $40 $50
Variable costs $20 $25

Fixed costs are expected to be $2,000.

a. What is the contribution margin for each type of patient?
b. If out total revenue is capped at $12,000, what mix of patients yields the best financial result?
c. If we have capacity for 350 patients in total, what mix of patients is financially most attractive?
d. We currently have 100 of each type of patient. ...

Solution Summary

The fixed cost, variable costs, contribution margins and total revenues are examined. The revenues and costs associated with each type of patient is determined.

$2.19
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Define revenue, fixed costs, variable costs and contribution margin; break-even point; graph

NEED HELP IN DEFINING THE QUESTION AND READ THE GRAPHS

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1. Define revenue, fixed cost, variable cost, and contribution margin.

2. What is meant by the term break-even point? Why are managers of a company interested in the break-even point?

3. "A change in fixed costs" in the second cell under break-even analysis. If fixed costs increase, what happens to the break-even level of output? Why?

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