Determine the breakeven volume of injections for 2016 using the followng formula for the contribution margin ratio (Breakeven revenue = Total fixed cost + (Total variable cost/Total revenue) x Breakeven revenue).

 

2. Dr. B would like an after tax net income of $200,000. What volume of injections will be necessary to obtain the desired income? Howe many injections per day will this be, based on 250 working days per year?

 

3.  Dr. B think that 250 injections per day is the maximum possible with current staffing. What options might he consider to help him achieve his target after tax income of $200,000?

 

4. Compute the likely 2016 operating leverage, and briefly explain to Dr. B why his net income has increased at a faster rate than his revenue (Hint : Degree of operating leverage = Total contribution margin/Profit)

 

5.  Briefly explain to Dr. B why his cash flow for 2016 will likely exceed his net income.

 

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Revenue Immunization Clinic Inc. Projected Income Statement For Year Ended December 31, 2016 $ 480,000.00 Expense Medical supplies $ 160,000.00 Physician salary $ 60,000.00 Nurse salary $ 40,000.00 Hourly wages $ 20,000.00 Payroll taxes - benefits $ 36,000.00 Rent Professional fees $ 12,000.00 $ 12,000.00 Equipment depreciation $ 5,000.00 Utilities $ 6,000.00 Advertising $ 20,000.00 Miscellaneous expenses $ 15,000.00 Total expenses $ 386,000.00 Income before income taxes $ 94,000.00 Net Income Income tax expense $ 23,500.00 $ 70,500.00 Revenue Immunization Clinic Inc. Projected Income Statement For Year Ended December 31, 2016 $ 480,000.00 Expense Medical supplies $ 160,000.00 Physician salary $ 60,000.00 Nurse salary $ 40,000.00 Hourly wages $ 20,000.00 Payroll taxes - benefits $ 36,000.00 Rent Professional fees $ 12,000.00 $ 12,000.00 Equipment depreciation $ 5,000.00 Utilities $ 6,000.00 Advertising $ 20,000.00 Miscellaneous expenses $ 15,000.00 Total expenses $ 386,000.00 Income before income taxes $ 94,000.00 Net Income Income tax expense $ 23,500.00 $ 70,500.00

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