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PPO of Millbridge Township (PPOMT) sells health benefit plans to local employers. PPOMT charges its clients (local employers) $50 for each office visit provided to
- PPO of Millbridge Township (PPOMT) sells health benefit plans to local employers. PPOMT charges its clients (local employers) $50 for each office visit provided to a covered employee. PPOMT contracts with individual physicians a fee of $40 for each new patient visit and $30 for each follow-up office visit. Twenty percent of all office visits are new patient visits. PPOMT maintains an office building where all routine office visits are conducted and pays $6,000 in occupancy expenses each month for the building. PPOMT also incurs monthly staffing cost of $12,000 for maintenance and administrative staff at its facility.
Percentage of Visits | Charge (P) | Variable Cost (VC) | Contribution Margin (CM) | Weighted Average CM | |
New patient visits | 20% | ||||
Follow up visits | 80% | ||||
Total | 100% |
- Fill in Table 2 above.
- What is the total weighted average contribution margin?
- How many office visits must PPOMT deliver to break even? Show your calculation.
- Assuming that PPOMT's facility is open 21 days in a typical month, would it earn profit if each of its five contracted physicians sees an average of 12 patients each day? Explain.
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