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

Furthermore, assume that the group expects to perform 7,500 procedures in the coming year.

a. Construct the group’s base case projected profit and loss 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 $500,000 Variable cost per procedure $25 Charge (revenue) per procedure $100