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Posted on Sep 10, 2024

Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary.

image text in transcribed Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary. Assuming that management is able to decrease discretionary fixed costs by 10%, what would be the impact on Bridgestones break-even point revenues?

\begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{12}{|l|}{ Exhibit 1} \\ \hline & Assessment & Urinalysis & \begin{tabular}{c} Case \\ Management \end{tabular} & \begin{tabular}{c} Group \\ Counseling \end{tabular} & \begin{tabular}{c} individual \\ Counseling \end{tabular} & \begin{tabular}{c} Crisis \\ Intervention \end{tabular} & \begin{tabular}{l} Intensive \\ Outpatient \end{tabular} & \begin{tabular}{l} Medical \\ Somatic \end{tabular} & \begin{tabular}{l} Methadone \\ Maint. \end{tabular} & Ambul Detox & Total \\ \hline \multicolumn{12}{|l|}{ Medicaid } \\ \hline Rate & 40 & 100 & 80 & 30 & 90 & 140 & 110 & 200 & 15 & 260 & \\ \hline Units & 4,000 & 11,550 & 6,000 & 28,000 & 12,000 & 1,500 & 2,000 & 800 & 8,000 & 1,300 & \\ \hline Revenue & 160,000 & $1,155,000 & 480,000 & $840,000 & $1,080,000 & $210,000 & $220,000 & 160,000 & 120,000 & 338,000 & \begin{tabular}{ll} $4,763,000 \\ \end{tabular} \\ \hline State & & & & & & & 3,000 & & & 205,000 & 208,000 \\ \hline Total & 170,000 & $1,155,500 & 480,000 & $845,000 & $1,090,000 & $210,000 & $226,500 & 160,000 & 120,000 & 543,000 & $5,000,000 \\ \hline & & & & & & & & & & & \\ \hline \multicolumn{12}{|l|}{ Variable Costs } \\ \hline Medications/Tests & 30,000 & 404,250 & & \$ 140,000 & 120,000 & 30,000 & $200,000 & 200,000 & 96,000 & 260,000 & \$ 1,480,250 \\ \hline Other & 2,500 & 2,000 & 10,000 & 2,000 & 2,000 & 1,000 & 250 & & & & 19,750 \\ \hline Total & 32,500 & 406,250 & 10,000 & 142,000 & 122,000 & 31,000 & 200,250 & 200,000 & 96,000 & 260,000 & 1,500,000 \\ \hline Contribution Margin & 137,500 & 749,250 & 470,000 & $703,000 & 968,000 & $179,000 & 26,250 & (40,000) & 24,000 & 283,000 & $3,500,000 \\ \hline & & & & & & & & & & & \\ \hline Consulting fees & & & & & & & & & & & 174,685 \\ \hline Rent & & & & & & & & & & & 419,244 \\ \hline Transportation & & & & & & & & & & & 104,811 \\ \hline Office supplies & & & & & & & & & & & 69,874 \\ \hline Depreciation & & & & & & & & & & & 373,424 \\ \hline Other & & & & & & & & & & & 524,055 \\ \hline Total Fixed expenses & & & & & & & & & & & 3,493,700 \\ \hline & & & & & & & & & & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{12}{|l|}{ Exhibit 2} \\ \hline & Assessment & Urinalysis & \begin{tabular}{c} Case \\ Management \end{tabular} & \begin{tabular}{c} Group \\ Counseling \end{tabular} & \begin{tabular}{c} individual \\ Counseling \end{tabular} & \begin{tabular}{c} Crisis \\ Intervention \end{tabular} & \begin{tabular}{c} Intensive \\ Outpatient \end{tabular} & \begin{tabular}{l} Medical \\ Somatic \end{tabular} & \begin{tabular}{l} Methadone \\ Maint. \end{tabular} & Ambul Detox & Total \\ \hline \multicolumn{12}{|l|}{ Revenue } \\ \hline \multicolumn{12}{|l|}{ Medicaid } \\ \hline Rate & 40 & 100 & 80 & 30 & 90 & 140 & 110 & 200 & 15 & 260 & \\ \hline Units & 1,000 & 2,888 & 1,500 & 7,000 & 3,000 & 375 & 500 & 200 & 2,000 & 325 & \\ \hline Revenue & 40,000 & 288,800 & 120,000 & 210,000 & 270,000 & 52,500 & 55,000 & 40,000 & 30,000 & 84,500 & $1,190,800 \\ \hline State & & & & & & & 750 & & & 51,250 & 52,000 \\ \hline Private pay & 2,500 & 125 & & 1,250 & 2,500 & & 875 & & & & 7,250 \\ \hline Total & 42,500 & 288,925 & 120,000 & 211,250 & 272,500 & 52,500 & 56,625 & 40,000 & 30,000 & 135,750 & $1,250,050 \\ \hline \multicolumn{12}{|l|}{ Variable Costs } \\ \hline Medications/Tests & 7,500 & 101,063 & & 35,000 & 30,000 & 7,500 & 50,000 & 50,000 & 24,000 & 65,000 & 370,063 \\ \hline Other & 625 & 500 & 2,500 & 500 & 500 & 250 & 63 & & & & 4,938 \\ \hline Total & 8,125 & 101,563 & 2,500 & 35,500 & 30,500 & 7,750 & 50,063 & 50,000 & 24,000 & 65,000 & 375,001 \\ \hline Contribution Margin & 34,375 & 187,362 & 117,500 & 175,750 & 242,000 & 44,750 & 6,563 & (10,000) & 6,000 & 70,750 & 875,050 \\ \hline \multicolumn{12}{|l|}{ Fixed expenses } \\ \hline Salaries \& Benefits & & & & & & & & & & & 456,901 \\ \hline Consulting fees & & & & & & & & & & & 43,671 \\ \hline Rent & & & & & & & & & & & 104,811 \\ \hline Transportation & & & & & & & & & & & 26,203 \\ \hline Office supplies & & & & & & & & & & & 17,469 \\ \hline Depreciation & & & & & & & & & & & 93,356 \\ \hline Other & & & & & & & & & & & 131,014 \\ \hline Total Fixed expenses & & & & & & & & & & & 873,425 \\ \hline & & & & & & & & & & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{12}{|l|}{ Exhibit 1} \\ \hline & Assessment & Urinalysis & \begin{tabular}{c} Case \\ Management \end{tabular} & \begin{tabular}{c} Group \\ Counseling \end{tabular} & \begin{tabular}{c} individual \\ Counseling \end{tabular} & \begin{tabular}{c} Crisis \\ Intervention \end{tabular} & \begin{tabular}{l} Intensive \\ Outpatient \end{tabular} & \begin{tabular}{l} Medical \\ Somatic \end{tabular} & \begin{tabular}{l} Methadone \\ Maint. \end{tabular} & Ambul Detox & Total \\ \hline \multicolumn{12}{|l|}{ Medicaid } \\ \hline Rate & 40 & 100 & 80 & 30 & 90 & 140 & 110 & 200 & 15 & 260 & \\ \hline Units & 4,000 & 11,550 & 6,000 & 28,000 & 12,000 & 1,500 & 2,000 & 800 & 8,000 & 1,300 & \\ \hline Revenue & 160,000 & $1,155,000 & 480,000 & $840,000 & $1,080,000 & $210,000 & $220,000 & 160,000 & 120,000 & 338,000 & \begin{tabular}{ll} $4,763,000 \\ \end{tabular} \\ \hline State & & & & & & & 3,000 & & & 205,000 & 208,000 \\ \hline Total & 170,000 & $1,155,500 & 480,000 & $845,000 & $1,090,000 & $210,000 & $226,500 & 160,000 & 120,000 & 543,000 & $5,000,000 \\ \hline & & & & & & & & & & & \\ \hline \multicolumn{12}{|l|}{ Variable Costs } \\ \hline Medications/Tests & 30,000 & 404,250 & & \$ 140,000 & 120,000 & 30,000 & $200,000 & 200,000 & 96,000 & 260,000 & \$ 1,480,250 \\ \hline Other & 2,500 & 2,000 & 10,000 & 2,000 & 2,000 & 1,000 & 250 & & & & 19,750 \\ \hline Total & 32,500 & 406,250 & 10,000 & 142,000 & 122,000 & 31,000 & 200,250 & 200,000 & 96,000 & 260,000 & 1,500,000 \\ \hline Contribution Margin & 137,500 & 749,250 & 470,000 & $703,000 & 968,000 & $179,000 & 26,250 & (40,000) & 24,000 & 283,000 & $3,500,000 \\ \hline & & & & & & & & & & & \\ \hline Consulting fees & & & & & & & & & & & 174,685 \\ \hline Rent & & & & & & & & & & & 419,244 \\ \hline Transportation & & & & & & & & & & & 104,811 \\ \hline Office supplies & & & & & & & & & & & 69,874 \\ \hline Depreciation & & & & & & & & & & & 373,424 \\ \hline Other & & & & & & & & & & & 524,055 \\ \hline Total Fixed expenses & & & & & & & & & & & 3,493,700 \\ \hline & & & & & & & & & & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{12}{|l|}{ Exhibit 2} \\ \hline & Assessment & Urinalysis & \begin{tabular}{c} Case \\ Management \end{tabular} & \begin{tabular}{c} Group \\ Counseling \end{tabular} & \begin{tabular}{c} individual \\ Counseling \end{tabular} & \begin{tabular}{c} Crisis \\ Intervention \end{tabular} & \begin{tabular}{c} Intensive \\ Outpatient \end{tabular} & \begin{tabular}{l} Medical \\ Somatic \end{tabular} & \begin{tabular}{l} Methadone \\ Maint. \end{tabular} & Ambul Detox & Total \\ \hline \multicolumn{12}{|l|}{ Revenue } \\ \hline \multicolumn{12}{|l|}{ Medicaid } \\ \hline Rate & 40 & 100 & 80 & 30 & 90 & 140 & 110 & 200 & 15 & 260 & \\ \hline Units & 1,000 & 2,888 & 1,500 & 7,000 & 3,000 & 375 & 500 & 200 & 2,000 & 325 & \\ \hline Revenue & 40,000 & 288,800 & 120,000 & 210,000 & 270,000 & 52,500 & 55,000 & 40,000 & 30,000 & 84,500 & $1,190,800 \\ \hline State & & & & & & & 750 & & & 51,250 & 52,000 \\ \hline Private pay & 2,500 & 125 & & 1,250 & 2,500 & & 875 & & & & 7,250 \\ \hline Total & 42,500 & 288,925 & 120,000 & 211,250 & 272,500 & 52,500 & 56,625 & 40,000 & 30,000 & 135,750 & $1,250,050 \\ \hline \multicolumn{12}{|l|}{ Variable Costs } \\ \hline Medications/Tests & 7,500 & 101,063 & & 35,000 & 30,000 & 7,500 & 50,000 & 50,000 & 24,000 & 65,000 & 370,063 \\ \hline Other & 625 & 500 & 2,500 & 500 & 500 & 250 & 63 & & & & 4,938 \\ \hline Total & 8,125 & 101,563 & 2,500 & 35,500 & 30,500 & 7,750 & 50,063 & 50,000 & 24,000 & 65,000 & 375,001 \\ \hline Contribution Margin & 34,375 & 187,362 & 117,500 & 175,750 & 242,000 & 44,750 & 6,563 & (10,000) & 6,000 & 70,750 & 875,050 \\ \hline \multicolumn{12}{|l|}{ Fixed expenses } \\ \hline Salaries \& Benefits & & & & & & & & & & & 456,901 \\ \hline Consulting fees & & & & & & & & & & & 43,671 \\ \hline Rent & & & & & & & & & & & 104,811 \\ \hline Transportation & & & & & & & & & & & 26,203 \\ \hline Office supplies & & & & & & & & & & & 17,469 \\ \hline Depreciation & & & & & & & & & & & 93,356 \\ \hline Other & & & & & & & & & & & 131,014 \\ \hline Total Fixed expenses & & & & & & & & & & & 873,425 \\ \hline & & & & & & & & & & & \\ \hline \end{tabular}