East Chestnut Regional Health System Case Study:Breakeven Analysis Worksheet

Breakeven Analysis in economics, marketing, and cost accounting refers to the point at which total cost and total revenue are equal. A breakeven point analysis is used to determine the number of units of a product or service that must be sold to cover total costs (fixed and variable costs).

This means you have covered all of your costs at the number of units sold the formula calculates.

The formula for breakeven analysis is as follows:

Breakeven quantity = Fixed costs / (Sales price per unit - Variable cost per unit)

Example of Breakeven Analysis:

Your clinic wants to offer obstetrical services at your women's center.

Assume you know that a new suite of offices will need to be designed within your existing facility in which to provide the service. The cost for build out for these offices will cost $50,000. This is a one-time charge. This represents your fixed cost.

Assume your OB physician cost is $70 per office visit of 15 minutes. The cost for your office staff per patient visit is $20 per office visit of 15 minutes. Supplies used per office visit is estimated at $10. The total variable cost associated with one office visit of 15 minutes is the sum of these charges ($70 + $20 + $10 = $100) or $100 per 15-minute office visit.

Assume your clinic charges a total revenue of $200 per 15-minute office visit per patient.

To determine the breakeven point for offering OB service at your clinic, plug these numbers into the formula:

Break even quantity = $50,000 / ($200 - $100) = $50,000 / $100 = 500 patient visits.

Therefore, given the fixed costs, variable costs, and revenue gained for each patient visit, your organization would need to provide 500 OB office visit to break even during the period of one year.

Use this form to create your ECRHS Breakeven Analysis. Enter the projected numbers, following the formulas next to the line item.

Breakeven elements	Breakeven costs and revenue
Costs
Fixed costs(A set one-time cost that will be required to product or deliver a product or service, such as construction of new office or lab space. This occurs once, and does not vary based on the number of products or services delivered)
Variable costs (Costs that repeat each time the product or service is manufactured or delivered, such as physician salary per procedure or visit, office staff salary per procedure or visit, supplies used per procedure or visit, calculated per individual visit).
Revenue per Product or Service delivered (per visit)
Breakeven Quantity Required (Fixed Costs / [Revenue per Unit - Variable Cost per Unit])