Question
Can you graph my answers to the questions? I have attached the answers. I ONLY need help with B. Sketching the two graphs. Grandview Clinic
Can you graph my answers to the questions?
I have attached the answers. I ONLY need help with B. Sketching the two graphs. Grandview Clinic has fixed costs of $2 million and an average variable cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates the population served will average two visits per year. a. Construct the base case projected P&L statement on the contract. b. Sketch two CVP analysis graphs for the clinicone with number of visits on the x -axis and one with number of members on the x -axis. c. What is the clinic's contribution margin on the contract?d. What profit gain can be realized if the clinic can lower per member utilization to 1.8 visits?
Amount
Net revenue ($150 * 20000 members)
$ 3,000,000
less- cost of sales ($15(per visit) * 2 * 20000)
$ 600,000
gross profit
$ 2,400,000
Less: - fixed expenses
$ 2,000,000
Net profit
$ 400,000
P&L statement
Answer: -
If the per member visit goes to 1.8, then the gain is
sales ($ 150 * 20000)
$ 3,000,000
Less:- variable cost ($ 15 per visit * 1.8 times * 20000)
$ 540,000
contribution
$ 2,460,000
Less- fixed expenses
$ 2,000,000
Net profit
$ 460,000
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