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The fixed costs directly associated with Springfield's nursing division were estimated to be $9,000 a month for rent and other expenses. The variable costs of supplies (measured on a per-visit basis) were expected to be $30. Mr. Hoover believed that the program could earn revenue of $200 per visit per nurse. Nurses averaged six visits a day.

In terms of personnel, Mr. Hoover saw two options. The first was to hire full time nurses to meet expected demand each month. Each nurse would work a maximum of twenty days per month. His or her monthly salary would be 6,000, regardless of the number of visits actually made during the month.

Assignment

1. Calculate the breakeven point for each option. Why do these breakeven volumes differ?

2. Which option is preferable? Why?

3. Assuming the quarterly data represent the pattern for the upcoming year, how should Mr. Hoover staff the division so as to maximize the VNA's surplus?

4. What other factors or options should Mr. Hoover consider?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9400396

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