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

Fixed Costs:$500,000

Variable cost per procedure$25

Charge (revenue) per procedure$100

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

5.3.a. Construct the group's base case projected profit and loss (P & L) statement.

5.3.b. (1). What is the group's contribution margin?

5.3.b. (2). What is the group's breakeven point?

5.3.c. (1). What volume is required to provide a pretax profit of $100,000?

5.3.c. (2). What volume is required to provide a pretax profit of $200,000?

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

5.3.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, & d under these conditions.

Fixed Costs:$500,000

Variable cost per procedure$25

Charge (revenue) per procedure$100 * 80% = $80

5.3.e.a. Construct the group's base case projected P & L statement.

5.3.e.b. (1). What is the group's contribution margin?

5.3.e.b. (2). What is the group's breakeven point?

5.3.e.c. (1) What volume is required to provide a pretax profit of $100,000?

5.3.e.c. (2) What volume is required to provide a pretax profit of $200,000?

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