Assume that a radiology group practice has the following cost structure:

Furthermore, assume that the group expects to perform7,500 procedures in the coming year.

a. Construct the group’s base case projected P&L statement.
b.What is the group’s contribution margin?What is its breakeven point?

c. What volume is required to provide a pretax profit of $100,000? A pretax profit of $200,000?

d. Sketch out a CVP analysis graph depicting the base case situation.

e. Now, assume that the practice contracts with one HMO, and the plan proposes a 20 percent discount from charges. Redo questions

a, b,

c, and d under these conditions.

Transcribed Image Text:

Fixed costs Variable cost per procedure Charge (revenue) per procedure $500,000 25 100