Dr. Hughes and Dr. Hawkins, owners of the Spanish Fork Care Clinic, have $$ 150,000$ of fixed

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Dr. Hughes and Dr. Hawkins, owners of the Spanish Fork Care Clinic, have $\$ 150,000$ of fixed costs per year. They receive 20,000 patient visits in a year, charging each patient an average of $\$ 20$ per visit; variable costs average $\$ 2$ per visit (needles, medicines, and so on).

1. What is the contribution margin per patient visit?

2. What is the total contribution margin per year?

3. What is the total pretax profit for a year?

4. Drs. Hughes and Hawkins can bring in another doctor at a salary of $\$ 100,000$ per year. If this new doctor can handle 5,000 patient visits per year, should the new doctor be hired? (Assume no additional fixed costs will be incurred.)

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Survey Of Accounting

ISBN: 9780538846172

1st Edition

Authors: James D. Stice, W. Steve Albrecht, Earl Kay Stice, K. Fred Skousen

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