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BEP Exercises

The document discusses three examples of break-even analysis calculations. In the first example, the break-even point for a new hospital procedure is calculated to be 1000 patients. The second example shows that with 1200 patients, the hospital would make a profit of $20,000. The third example calculates the break-even units for a new product as 3111 units and shows that selling 10,000 units at a reduced price would contribute $24,000 in total profits.

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346 views2 pages

BEP Exercises

The document discusses three examples of break-even analysis calculations. In the first example, the break-even point for a new hospital procedure is calculated to be 1000 patients. The second example shows that with 1200 patients, the hospital would make a profit of $20,000. The third example calculates the break-even units for a new product as 3111 units and shows that selling 10,000 units at a reduced price would contribute $24,000 in total profits.

Uploaded by

炜伦林
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Break-even analysis

Question 1

A hospital is considering a new procedure to be offered at $200 per patient. The fixed cost per
year would be $100,000, with total variable costs of $100 per patient. What is the break-even
quantity for this service?

Solution:

F 100,000
BEPX = = =1000 patients
p−v 200−100

Question 2

The same hospital has 1200 patients tried this new procedure. Will the hospital make a profit? If
so, how much?

Solution:

Profit = px-(F + vx) = 200(1200) – [100,000 + 100(1200)] = $20,000

Question 3

A company has a new product. Variable costs are $7 per unit. Fixed costs are $56,000 per year.
(a) If the selling price is $25, how many units must be sold to break even?
(b) The company can sell 10,000 units if the price is reduced to $15. With this pricing, what
would be the product’s total contribution to profits?

Solution:

F 56000
(a) BEPX = = =3111units
p−v 25−7

(b) Profit = px-(F + vx) = 15(10000) – [56,000 + 7(10000)] = $24,000

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