1. As a member of the management team of Physician Practice Group, you have been asked to evaluate a proposal from Edgemont Insurance to provide services to a group of individuals using a fee-for-service reimbursement model. Physician Practice Group has the following cost structure.

   • Fixed Costs $350,000
   • Variable cost per procedure $35
   • Charge (revenue) per procedure $95
   • Current Volume 6,500 procedures

   Answer the following questions:

   1. Construct the group's base case projected P&L statement (Profit and Loss statement)
   2. What is the group's contribution margin?
   3. What is the breakeven point?
   4. What volume is required to provide a pretax profit of $100,000?
   5. Edgemont Insurance estimates that the group will utilize approximately 2,500 visits during the year. The proposal asks for a price of $56 per visit. Additional fixed costs of $100,000 would be needed to expand the facility to accommodate the additional volume. Would you recommend accepting the terms of the proposal? Why or why not? If not, what amount would be acceptable?