Dr. Brandon started a for=profit immunization clinic in January 2013. The clinic was founded with the vision of providing five types of immunization injections for a low price of $10 each, with the aim of making them affordable to all.

Immunization Clinic, Inc. is located in a small building rented at a cost of $1,000 per month. The clinic hired one nurse to work full-time and two college students to work 20 hours per week. A certified public accountant (CPA) also was hired at a cost of $1,000 per month to handle billings, collections, payroll, payments, financial records, monthly financial statements, and tax returns. Necessary equipment was purchased for cash. Dr. Brandon had noticed that expenses for medical supplies and advertising have varied while the remaining expenses have been constant.

Between 2013 and 2015, the patient volume doubled. Profits have much more than doubled. Dr. Brandon does not understand why profits have gone up so much faster than patient volume. The. CPA prepared the following forecasted income statement for 2016:

Immunization Clinic, Inc. Projected Income Statement for Year Ended December 31, 2016
Revenues			$480,000
Expenses
	Medical Supplies	$160,000
	Physician salary	60,000
	Nurse salary	40,000
	Hourly wages	20,000
	Payroll taxes-benefits	36,000
	Rent	12,000
	Professional fees	12,000
	Equipment depreciation	5,000
	Utilities	6,000
	Advertising	20,000
	Miscellaneous expenses	15,000
Total Expenses			386,000
Income before income taxes			94,000
Income tax expense			23,500
Net income			$70,500

Questions:

1. Determine the breakeven volume of injections for 2016 using the following formula for the contribution margin ratio approach:

Breakeven revenue = Total fixed costs + [(Total variable costs / Total revenue) x Breakeven revenue].

2. Dr. Brandon would like an after-tax net income of $200,000. What volume of injections will be necessary to obtain the desired income? How many injections per day will this be, based on 250 working days per year?

3. Dr. Brandon thinks that 250 injections per day is the maximum possible with current staffing. What options might he consider to help him achieve his target after-tax income of $200,000?

4. Compute the likely 20116 operating leverage, and briefly explain to Dr, Brandon why his net income has increased at a faster rate than his revenues. (Hint: Degree of operating leverage = Total contribution margin / profit)

5. Briefly explain to Dr. Brandon why his cash flow for 2016 will likely exceed his net income.