TABLE 1 Summary of Dr. Ashwen's Costs $12,195 5,700 6.100 7,250 One-Time Costs (Paid in Full) Purchased treatment table Purchased other miscellaneous equipment Fees and travel incurred for training in AET Fees and travel incurred for training in NERT Recurring (Monthly) Expenses House payment (monthly rent) Misc. house-related fees (utilities, etc.) (average) (monthly) Student loan payment (monthly) (30-year loan 8% interest) All other living expenses (average) (monthly) Part-time secretary (monthly) $1.450 210 844 2.220 550 TABLE 2 Summary of Dr. Ashwen's Revenues Chiropractic revenue (average) [Time per treatment = 10 minutes] $75 per treatment $50 per treatment $50 per treatment AET revenue [Time for two treatments = 15 minutes] NERT revenue [Time for eight treatments = 15 minutes] Percent of revenue from chiropractic treatments Percent of AETS Percent of revenue from NERTS 75% 15% 10% 1) How much sales revenue is Dr Ashwen generating per hour? Specifically, how much would she earn if she completed only chiropractic treatments for an hour? Only AETs for an hour? Only NERTs for an hour? (3 points) 2) Dr. Ashwen is growing concerned about recovering the costs she incurred learning AET and NERT. She wants to know how many hours she must spend treating patients with AET to recover (i.e. breakeven) the cost of learning AET. Similarly, how many hours must she spend treating patients with NERT to recover the cost of learning that procedure? (Note: when performing these calculations, you are the right track if you conclude that there are no variable costs.) (6 points) 3) Dr. Ashwen is also concerned about meeting her monthly financial obligations. Perform multiproduct breakeven to determine how many hours per month she must work to cover her total monthly expenses. (As a hint, hours per month is like your Q in break-even analysis. Although we never solved for Q in a multi-product break-even analysis in class, here it is relatively simple because there are no variable costs. As a result, all you need to determine is a product-weighted average sales price for the total product mix that Dr Ashwen will use to cover her fixed costs. To calculate this product weighted or service-weighted sales price first calculate the proportion of each hour of total sales revenue that would be allocated to each type of service (e.g. Chiropractic Revenue per Hour x % of Revenue = Service Weight Revenue per Hour) Then, sum those weights to obtain the product mix sales price, which is also your contribution margin due to the lack of variable costs. Plug this into the break-even fomula to determine Q.) (3 POINTS)
