In this assignment you are asked to determine how much ClearEye's pre-tax profit would change if the increased patient yield (increase of patients having their operations at ClearEyes from 5,283 to 6,669) were accomplished.

You will need to become familiar with Exhibt 5, Revenues and Expenses, of the ClearEyes Case. You will be asked to develope a new Revenues and Expenses chart based on the following changes to revenue and costs:

a. Revenue will increase because of the increase in the number of procedures. Net revenue per procedure remains the same at $1,338. b. Direct Variable Costs will increase based on the increased number of procedures. Direct Variable Cost per procedure remains at $480 per procedure c. Wages will remain the same except for the following: 1. Surgeon. A new part-time surgeon (30%) has been hired. The cost per case for the new surgeon will be the same as currently being paid to Dr. Zincola, $83.37. Dr. Zincola and the part-time surgeon will preform 5,997 operations (6,669 - 672 (to be performed by Dr. Connors)). 2. Management decided to hire one additional technician d. Benefits will increase based on increased labor costs (multiply total labor costs by 28%) e. Other Costs will remain the same except for the following 1. These three items will increase proportionately with patient volume (26.2351%): a) Cleaning and maintenance b) Legal c) Miscellaneous 2. Depreciation. This item equals the current amount + 15% x (new equipment charge of 11,000 (chairs) + 1 surgical room for 93,000)

Question1: Please complete the financial matrix comparing the revenues and expenses of the current and higher yield and upload the document here. Use the information included in the Quiz Instructions above to make the appropriate changes in revenue and costs for the higher yield. Enter the change and the % change between the current and higher yield.

Q 2: Enter the change in Revenue that would occur with the increased patient yield. HINT: Look at the Revenues row, Change column.

Q3: Enter the change in Direct Variable Costs between the current and higher yield. HINT: Look at the Direct Variable Cost per procedure row, Change column.

Q4: Enter the change in Total Wages (excluding benefits) between the current and higher yield. HINT: Look at the Subtotal Wages row, Change column.

Q5: Enter the change in benefits between the current and higher yield. HINT: Look at the Benefits row, Change column.

Q6: Enter the change in Other Costs between the current and higher yield. HINT: Look at the Sub-total (Other Costs row, Change column.

Q7: Bottom Line: By how much would ClearEyes' pre-tax income increase if staff were able to increase the number of patients having their operations to 6669?

Q8: By what percent would ClearEye's pre-tax income increase if staff were able to increase the number of patients having their operations to 6669? Enter your answer in the following format: ##.#

Exhibit 5 Revenues and Expenses Procedures per year: Revenues: $1,338 net revenue per procedure 5,283 $7,068,654 Costs $480 Wages Direct Variable Cost per procedure Surgeon $200,000+ $40/ operation 1 Receptionist @ $38,000 4 PSRs @ $38,000 3 Technicians @ $48,000 1 Cleaner @ $31,000 at 28% of labor costs $2,535,840 $384,440 $38,000 $152,000 $144,000 $31,000 $209,843 Benefits Other Costs Advertising Facility cost net of rent Cleaning and maintenance Other facility insurance, IT, various Legal Miscellaneous Accounting Depreciation $48,000 $36,000 $36,000 $90,238 $280,969 $80,420 $90,000 $160,000 SET CELL FORMAT FOR COLS D & E FOR CURRENCY, ZERO DECIMAL PLACES ClearEyes Cataract Clinic: Revenues and Expenses Current Yield Higher Yield $5,283.00 $6,669.00 (Col E-Col D 1,386 Procedures per year: (Col F/Col D 26.2351% Formulas for Col E w/ changes to yield 26.2351% =E5*C7 Per Procedure $1,338 Revenues: $1,338 net revenue per procedure ######### $8,923,122.00 $1,854,468 Costs Direct Variable Cost per procedure $480 ######### $3,201,120.00 $665,280 26.2351% =E5*C11 Wages $384,440.00 $499,997.11 $115,557 30.0586% =(E5-672)*C14 $83.37 Surgeon $200,000 + $40/operation +.3 Surgeon Surgeon cost per operation (4611 ops) 1 Receptionist @ 38,000 4 PSRS @ 38,000 3 Technicians @ 48,000 + 1 additional Tech 1 Cleaner @ 31,000 Sub-total (Wages): $38,000.00 $152,000.00 $144,000.00 $31,000.00 $749,440.00 =4*48000 =Sum(E13:E18) Benefits at 28% of labor costs $209,843.20 =E19*0.28 Sub-total (Direct Var Costs + Wages + Benefits): =E11+E19+E21 =D27*(1+$G$5) Other Costs Advertising Facility Cost net of rent Cleaning and Maintenance (Inc. 26.2351%) Other facility insurance, IT, various Legal (Inc. 26.2351%) Miscellaneous (Inc. 26.2351%) Accounting Depreciation (New Equip Charge: $11,000 for chairs + $93,000 for new surgical room) @ 15% Sub-total (Other Costs): $48,000.00 $36,000.00 $36,000.00 $90,238.00 $280.969.00 $80,420.00 $90,000.00 $160,000.00 =D29*(1+$G$5) =D30*(1+$G$5) =D32+(11000+93000)*0.15) $821,627.00 =Sum(E25:E32) =E7-(E23+E34) PRE-TAX INCOME (Revenue - (Dir Var Costs + Wages + Benefits + Other Costs) Pretax earnings is calculated by subtracting a firm's operating expenses from its gross margin or revenue. Exhibit 5 Revenues and Expenses Procedures per year: Revenues: $1,338 net revenue per procedure 5,283 $7,068,654 Costs $480 Wages Direct Variable Cost per procedure Surgeon $200,000+ $40/ operation 1 Receptionist @ $38,000 4 PSRs @ $38,000 3 Technicians @ $48,000 1 Cleaner @ $31,000 at 28% of labor costs $2,535,840 $384,440 $38,000 $152,000 $144,000 $31,000 $209,843 Benefits Other Costs Advertising Facility cost net of rent Cleaning and maintenance Other facility insurance, IT, various Legal Miscellaneous Accounting Depreciation $48,000 $36,000 $36,000 $90,238 $280,969 $80,420 $90,000 $160,000 SET CELL FORMAT FOR COLS D & E FOR CURRENCY, ZERO DECIMAL PLACES ClearEyes Cataract Clinic: Revenues and Expenses Current Yield Higher Yield $5,283.00 $6,669.00 (Col E-Col D 1,386 Procedures per year: (Col F/Col D 26.2351% Formulas for Col E w/ changes to yield 26.2351% =E5*C7 Per Procedure $1,338 Revenues: $1,338 net revenue per procedure ######### $8,923,122.00 $1,854,468 Costs Direct Variable Cost per procedure $480 ######### $3,201,120.00 $665,280 26.2351% =E5*C11 Wages $384,440.00 $499,997.11 $115,557 30.0586% =(E5-672)*C14 $83.37 Surgeon $200,000 + $40/operation +.3 Surgeon Surgeon cost per operation (4611 ops) 1 Receptionist @ 38,000 4 PSRS @ 38,000 3 Technicians @ 48,000 + 1 additional Tech 1 Cleaner @ 31,000 Sub-total (Wages): $38,000.00 $152,000.00 $144,000.00 $31,000.00 $749,440.00 =4*48000 =Sum(E13:E18) Benefits at 28% of labor costs $209,843.20 =E19*0.28 Sub-total (Direct Var Costs + Wages + Benefits): =E11+E19+E21 =D27*(1+$G$5) Other Costs Advertising Facility Cost net of rent Cleaning and Maintenance (Inc. 26.2351%) Other facility insurance, IT, various Legal (Inc. 26.2351%) Miscellaneous (Inc. 26.2351%) Accounting Depreciation (New Equip Charge: $11,000 for chairs + $93,000 for new surgical room) @ 15% Sub-total (Other Costs): $48,000.00 $36,000.00 $36,000.00 $90,238.00 $280.969.00 $80,420.00 $90,000.00 $160,000.00 =D29*(1+$G$5) =D30*(1+$G$5) =D32+(11000+93000)*0.15) $821,627.00 =Sum(E25:E32) =E7-(E23+E34) PRE-TAX INCOME (Revenue - (Dir Var Costs + Wages + Benefits + Other Costs) Pretax earnings is calculated by subtracting a firm's operating expenses from its gross margin or revenue