Essay on Healthcare Finance

1228 Words Apr 17th, 2012 5 Pages
HEALTHCARE FINANCE
Student name
Healthcare Finance course code
April 28, 2011

Healthcare Finance
Problem 5.1
Break-even analysis helps to plan and control business by showing break-even point, net profit and net loss areas. As it is mentioned in the graph below, on the break-even point cost is equal to revenue which means there is neither loss nor profit at the intersection of sales line and cost line (Frongello).

a) As two graphs are provided in the question; the horizontal line shows the fixed cost where the two semi-vertical (upright) lines show variable cost and sales, respectively. Provider B has greater fixed cost than provider A because B’s fixed cost line is higher than A’s; therefore, provider B has
|\$100,000 |
|Fixed cost |\$500,000 |
|Selling price |\$100 |
|Variable cost |\$25 |
|Volume |8,000 |

For the different value of pre-tax profit is going to be calculated as the same solution way mentioned above;

Volume = (200,000 + 500,000)/ (100 – 25) = 9,333.33
|Pre-tax profit |\$200,000 |
|Fixed cost |\$500,000 |
|Selling price |\$100 |
|Variable cost |\$25 |

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