# [Solution]Break-Even Analysis Case Study

You
and several of your colleagues business partners have decided to establish an
with this patient population base, have completed an extensive market analysis that
demonstrated a great need for the service, and are comfortable with setting up
a business and the costs associated with this special group of patients.

The outpatient
fertility clinic will have a fixed cost of \$9,788,000 —start-up costs, hiring
of specialty physicians, anesthesiologists, advanced practice nurses and staff
nurses, salaries, purchase of high-technology fertility equipment, and other
miscellaneous items.

The fertility clinic will be open Monday
through Saturday; 312 days per year.

The
fertility outpatient clinic has variable costs of \$500 per patient visit —fertility
medical equipment, oxygen supplies, and other miscellaneous items.

Each
patient will be charged the following per visit based on patient acuity
categories:

Simple                   15%     =          \$2,000Moderate               60%     =          \$6,500Complex               25%     =          \$10,000

The
projected patient visits per year are anticipated to be 7,488 visits. How many
patients would the clinic have to provide services for to break even, and at
what point would this occur?

What
is your interpretation of the break-even analysis?  Is this project a viable and profitable
service?  Does the break-even analysis
support moving forward with this business?
Why, or why not?

Category

Points

%

Description

Calculate the contribution margin for each type
of patient served at the fertility clinic.

15

15%

the criterion

Calculate the total weighted average
contributing margin.

15

15%

Calculate
the break-even quantity (number of visits).

15

15%

Calculate the
number of patients served per day.

15

15%

Calculate the number of days to break-even.

15

15%

Analysis of break-even
analysis

25

25%

100

100

A quality assignment will meet or
exceed all of the above requirements.

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