Problem:

Assume that the mangers of Tanner Hospital are setting the price on a new outpatient service. Here are relevant data estimates: Variable cost per visit $7.00 Annual direct fixed costs $500,000 Annual overhead allocation $50,000 Expected annual utilization 10,000 Visits

Required:

Question 1: What per visit price must be set for the service to break even? To earn an annual profit of $100,000?

Repeat part a, but assume that the variable cost per visit is $10. c. Return to the data given above. Again repeat part a, but assume the direct fixed costs are $1,000,000.

Note: Please show how you came up with the solution.