Ch.5_Decisonmaking with CVP_Inst

Ch.5_Decisonmaking with CVP_Inst - CHAPTER 5 Managerial...

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1 CHAPTER 5 Managerial Accounting Basics, Cost Behavior, and Profit Analysis Decision-making with CVP Analysis
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2 Learning Objectives Conduct CVP analysis on different scenarios and use results to make decisions
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3 Atlanta Clinic Example Assumptions Revenue and cost data on the basis of 75,000 expected visits: Revenue per visit $100 Total fixed costs $4,967,462 Total variable costs $2,113,500 Total costs $7,080,962 Average cost / visit $7,080,962 / 75,000 = 94.41
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4 CVP Analysis Under Discounted FFS Suppose one of Atlanta Clinic’s current payers wants a 40% discount. Payer contributes 5,000 visits. Should Atlanta Clinic agree?
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5 CVP Analysis Under Discounted FFS New price per visit = 100 * (1 – 0.40) New price per visit = 100 * 0.60 = $60
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6 Total revenues ($100 x 70,000) $7,000,000 Less Total VC ($28.18 x 70,000)      1,972,600    Total CM ($71.82 x 70,000) $5,027,400 Less Fixed costs   4,967,462 Profit   $     59,938    
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This note was uploaded on 02/24/2010 for the course HPM 340 taught by Professor Reiter during the Spring '10 term at UNC.

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Ch.5_Decisonmaking with CVP_Inst - CHAPTER 5 Managerial...

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