Transcript
Module 3: Part 2 Homework Problems – Organizational Costing and Profit Analysis
Institution Affiliation
Students Name
Date of Submission
Question 1
Construct a projected P&L statement at volume levels of 8,000 units. What would be the total revenues for this projected volume of 8,000 units?
To construct a projected P&L statement at volume levels of 8,000 units so that we can be able to find the value of the total revenues for the projected volume of 8,000 units, we go step by step. Taxes are assumed to be 30%.
Step 1: Arrange all the data provided into categories of variable cost, fixed cost, and total cost. This enables you to identify and realize the contribution margins like volume and costs of these accounts as well as altering the visits. See the table below;
Projections for First Year of Operations
Revenues (10,000 visits)
$ 400,000
Variable Cost
Medical Suppliers
$ 50,000
Administrative Suppliers
$ 10,000
Fixed Costs
Wages and Benefits
$ 220,000
Rent
$ 5,000
Depreciation
$ 30,000
Utilities
$ 2,500
Total Cost
Variable and Expenses
$ 317,500
Taxable Income
$ 82,500
Taxes (30%)
$ 24,750
Net Income/Profit
$ 57,750
Step 2: in this step, we determine the amount of dollar from the information summarized above based on the number of visits.
For instance, the amount of revenues is $ 400,000 but basing on the number of visits (10,000), we find the amount of dollar per visit. Therefore; $ 400,000/10,000 = $ 40 per visit.
Total variable cost comprises of both the medical supplies and administrative supplies. But this varies with the number of visits. To find the value of the total variable, we add the amount of Medical supplies and the amount of Administrative supplies i.e., $ 50,000+$10,000 = $ 60,000. To find the amount of dollar per visit, we divide the total amount of variable cost by the number of visits. I.e. $ 60,000/10,000 = $ 6 per visit.
Total fixed cost consists of depreciation, wages, and benefits rent and utilities. But all these elements, when added together, do not vary with the number of visitors like for the case of total variable. The total amount of fixed cost is $ 257,500, that is the addition of its components. So fixed cost remains the same.
Step: 3
This step involves preparing a clear and precise profit statement. In the process of making the profit statement, we will multiply the units given above (8,000) by the amount per dollar of the variable cost and revenue. The total value of fixed cost does not change. Therefore, we prepare the income statement to find the value of total revenue. See the table below.
Consolidated Profit Statement
Projected Volume of (8,000 units)
Total Revenues ($40 x Volume)= ($40 X 8,000)
$ 320,000
Variable Costs ($6 x Volume)= ($ 6 X 8,000)
$ 48,000
Fixed Costs- Remains same
$ 257,500
Taxable Income
$ 14,500 i.e. $ 320,000 - ($ 257,500+$ 48,000)
Taxes (30%)
$ 4,350 i.e. 30% of taxable income
Net Income / Profit
$ 10,150 ($ 14,500 - $ 4,350)
Therefore; the total revenues for this projected volume of 8,000 units = $ 320,000
Question 2
Construct a projected P&L statement at volume levels of 9,000 units. What would be the total variable costs for a volume of 9,000 units? Taxes are assumed to be 30%.
We construct a projected P&L statement at volume levels of 9,000 units so that we can be able to find the value of the total variable cost for the projected volume of 9,000 units.
Step 1: Arrange all the data provided into categories of variable cost, fixed cost, and total cost.
Projections for First Year of Operations
Revenues (10,000 visits)
$ 400,000
Variable Cost
Medical Suppliers
$ 50,000
Administrative Suppliers
$ 10,000
Fixed Costs
Wages and Benefits
$ 220,000
Rent
$ 5,000
Depreciation
$ 30,000
Utilities
$ 2,500
Total Cost
Variable and Expenses
$ 317,500
Taxable Income
$ 82,500
Taxes (30%)
$ 24,750
Net Income/Profit
$ 57,750
Step 2: in this step, we determine the amount of dollar from the information summarized above based on the number of visits (10,000).
For instance, the amount of revenues is $ 400,000 but basing on the number of visits (10,000), we find the amount of dollar per visit. Therefore; $ 400,000/10,000 = $ 40 per visit.
Total variable cost comprises of both the medical supplies and administrative supplies. But this varies with the number of visits. To find the value of the total variable, we add the amount of Medical supplies and the amount of Administrative supplies i.e., $ 50,000+$10,000 = $ 60,000. To find the amount of dollar per visit, we divide the total amount of variable cost by the number of visits. I.e. $ 60,000/10,000 = $ 6 per visit.
Total fixed cost consists of depreciation, wages, and benefits rent and utilities. But all these elements, when added together, do not vary with the number of visitors like for the case of total variable. The total amount of fixed cost is $ 257,500, that is the addition of its components. So fixed cost remains the same.
Step: 3
This step involves preparing a clear and precise profit statement. In the process of making the profit statement, we will multiply the units given above (9,000) by the amount per dollar of the variable cost to get the total value of variable cost.
Therefore, we prepare the income statement to find the value of the total variable cost. Note; the full amount of fixed cost does not change. See the table below.
Consolidated Profit Statement
Projected Volume of (9,000 units)
Total Revenues ($40 x Volume)= ($40 X 9,000)
$ 360,000
Variable Costs ($6 x Volume)= ($ 6 X 9,000)
$ 54,000
Fixed Costs- Remains same
$ 257,500 given
Taxable Income
$ 48,500 i.e. $ 360,000 - ($ 257,500 + $ 54,000)
Taxes (30%)
$ 14,550 i.e. 30% of taxable income
Net Income / Profit
$ 33,950 ($ 48,500 - $ 14,550)
Therefore; the total amount of variable cost for the projected volume of 9,000 units = $ 54,000
Question 3
Construct a projected P&L statement at volume levels of 10,000 units. What would be the total fixed costs for a volume of 10,000 units? Taxes are assumed to be 30%.
Step 1: set all the information provided into categories of variable cost, fixed cost, and total cost, as shown in the table below.
Projections for First Year of Operations
Revenues (10,000 visits)
$ 400,000
Variable Cost
Medical Suppliers
$ 50,000
Administrative Suppliers
$ 10,000
Fixed Costs
Wages and Benefits
$ 220,000
Rent
$ 5,000
Depreciation
$ 30,000
Utilities
$ 2,500
Total Cost
Variable and Expenses
$ 317,500
Taxable Income
$ 82,500
Taxes (30%)
$ 24,750
Net Income/Profit
$ 57,750
Step 2: in this step, we determine the amount of dollar from the information summarized above based on the number of visits (10,000).
For instance, the amount of revenues is $ 400,000 but basing on the number of visits (10,000), we find the amount of dollar per visit. Therefore; $ 400,000/10,000 = $ 40 per visit.
Total variable cost comprises of both the medical supplies and administrative supplies. But this varies with the number of visits. To find the value of the total variable, we add the amount of Medical supplies and the amount of Administrative supplies i.e., $ 50,000+$10,000 = $ 60,000. To find the amount of dollar per visit, we divide the total amount of variable cost by the number of visits. I.e. $ 60,000/10,000 = $ 6 per visit.
Total fixed cost consists of depreciation, wages, and benefits rent and utilities. But all these elements, when added together, do not vary with the number of visitors like for the case of total variable. The total amount of fixed cost is $ 257,500, that is the addition of its components. So fixed cost remains the same. They don't vary with the changing number of visitors. Therefore they remain the same.
Step: 3
This step involves preparing a clear and precise profit statement. In the process of making the profit statement, we will multiply the units given above (10,000) by the amount per dollar of the variable cost to get the total value of variable cost.
Therefore, we prepare the income statement to find the value of the total variable cost. Note; the total amount of fixed cost does not change. See the table below.
Consolidated Profit Statement
Projected Volume of (10,000 units)
Total Revenues ($40 x Volume)= ($40 X 10,000)
$ 400,000
Variable Costs ($6 x Volume)= ($ 6 X 10,000)
$ 60,000
Fixed Costs- Remains same don’t change
$ 257,500 given
Taxable Income
$ 82,500 i.e. $ 360,000 - ($ 257,500 + $ 60,000)
Taxes (30%)
$ 24,750 i.e. 30% of taxable income
Net Income / Profit
$ 57,750 ($ 82,500 - $ 24,750)
Therefore; the total amount of fixed cost for the projected volume of 10,000 units = $ 257,500
Question 4
Construct a projected P&L statement at volume levels of 11,000 units. What is the taxable income for a volume of 11,000 units? Taxes are assumed to be 30%.
Step 1: Set all the information provided into categories of variable cost, fixed cost, and total cost, as shown in the table below.
Projections for First Year of Operations
Revenues (10,000 visits)
$ 400,000
Variable Cost
Medical Suppliers
$ 50,000
Administrative Suppliers
$ 10,000
Fixed Costs
Wages and Benefits
$ 220,000
Rent
$ 5,000
Depreciation
$ 30,000
Utilities
$ 2,500
Total Cost
Variable and Expenses
$ 317,500
Taxable Income
$ 82,500
Taxes (30%)
$ 24,750
Net Income/Profit
$ 57,750
Step 2: in this step, we determine the amount of dollar from the information summarized above based on the number of visits (10,000).
For instance, the amount of revenues is $ 400,000 but basing on the number of visits (10,000), we find the amount of dollar per visit. Therefore; $ 400,000/10,000 = $ 40 per visit.
Total variable cost comprises of both the medical supplies and administrative supplies. But this varies with the number of visits. To find the value of the total variable, we add the amount of Medical supplies and the amount of Administrative supplies i.e., $ 50,000+$10,000 = $ 60,000. To find the amount of dollar per visit, we divide the total amount of variable cost by the number of visits. I.e. $ 60,000/10,000 = $ 6 per visit.
Total fixed cost consists of depreciation, wages, and benefits rent and utilities. But all these elements, when added together, do not vary with the number of visitors like for the case of total variable. The total amount of fixed cost is $ 257,500, that is the addition of its components. So fixed cost remains the same. They don't vary with the changing number of visitors. Therefore they remain the same.
Step: 3
This step involves preparing a clear and precise profit statement. In the process of making the profit statement, we will multiply the units given above (11,000) by the amount per dollar of the variable cost and revenue.
Therefore, we prepare the income statement to find the value of taxable income. Note; the total amount of fixed cost does not change. See the table below.
Consolidated Profit Statement
Projected Volume of (10,000 units)
Total Revenues ($40 x Volume)= ($40 X 11,000)
$ 440,000
Variable Costs ($6 x Volume)= ($ 6 X 11,000)
$ 66,000
Fixed Costs- Remains same don’t change
$ 257,500 given
Taxable Income
$ 116,500 i.e. $ 440,000 - ($ 257,500 + $ 66,000)
Taxes (30%)
$ 34,950 i.e. 30% of taxable income
Net Income / Profit
$ 81,550 ($ 82,500 - $ 24,750)
Therefore; the total amount of taxable income for the projected volume of 11,000 units = $ 116,500
Question 5
Construct a projected P&L statement at volume levels of 12,000 units. What is the profit for a volume of 12,000 units? Taxes are assumed to be 30%.
Step 1: Set all the information provided into categories of variable cost, fixed cost, and total cost, as shown in the table below.
Projections for First Year of Operations
Revenues (10,000 visits)
$ 400,000
Variable Cost
Medical Suppliers
$ 50,000
Administrative Suppliers
$ 10,000
Fixed Costs
Wages and Benefits
$ 220,000
Rent
$ 5,000
Depreciation
$ 30,000
Utilities
$ 2,500
Total Cost
Variable and Expenses
$ 317,500
Taxable Income
$ 82,500
Taxes (30%)
$ 24,750
Net Income/Profit
$ 57,750
Step 2: in this step, we determine the amount of dollar from the information summarized above based on the number of visits (10,000).
For instance, the amount of revenues is $ 400,000 but basing on the number of visits (10,000), we find the amount of dollar per visit. Therefore; $ 400,000/10,000 = $ 40 per visit.
Total variable cost comprises of both the medical supplies and administrative supplies. But this varies with the number of visits. To find the value of the total variable, we add the amount of Medical supplies and the amount of Administrative supplies i.e., $ 50,000+$10,000 = $ 60,000. To find the amount of dollar per visit, we divide the total amount of variable cost by the number of visits. I.e. $ 60,000/10,000 = $ 6 per visit.
Total fixed cost consists of depreciation, wages, and benefits rent and utilities. But all these elements, when added together, do not vary with the number of visitors like for the case of total variable. The total amount of fixed cost is $ 257,500, that is the addition of its components. So fixed cost remains the same. They don't vary with the changing number of visitors; therefore, they remain the same.
Step: 3
This step involves preparing a clear and precise profit statement. In the process of making the profit statement, we will multiply the units given above (12,000) by the amount per dollar of the variable cost and revenue.
Therefore, we prepare the income statement to find the amount of net income/profit. Note; the total value of fixed cost does not change. See the table below.
Consolidated Profit Statement
Projected Volume of (10,000 units)
Total Revenues ($40 x Volume)= ($40 X 12,000)
$ 480,000
Variable Costs ($6 x Volume)= ($ 6 X 12,000)
$ 72,000
Fixed Costs- Remains same don’t change
$ 257,500 given
Taxable Income
$ 150,500 i.e. $ 480,000 - ($ 257,500 + $ 72,000)
Taxes (30%)
$ 45,150 i.e. 30% of taxable income
Net Income / Profit
$ 105,350 ($ 150,500 - $ 45,150)
Therefore; the total amount of net income/profit for the projected volume of 12,000 units = $ 105,350
Question 6
Based on this scenario, what is the contribution margin for a volume of 1,000 units?
In this case, first we have to find the value of revenue which is calculated by;
Number of visits = 1,000, cost per visit = $ 50
Revenue = ($50 X 1,000) = $ 50,000
Secondly, we calculate the value of variable cost, whereby; the number of visits= 1,000, cost per visit = $ 30.
Variable cost = ($30 X 1,000) = $ 30,000
Thirdly, we find the value of contribution margin, simply by subtracting the value of variable cost from the value of revenue.
Therefore; Contribution Margin = Revenue – Variable cost
$ 50,000 - $ 30,000 = $ 20,000
Contribution margin = $ 20,000
Then, we prepare Profit / Loss Statement for Triangle Pediatrics
Revenue ($50 a visit per 1,000 visits)
$ 50,000
Less: Variable Cost ($30 a visit per 1,000 visits)
$ 30,000
Contribution Margin
$ 20,000
Less: Fixed Cost ($15,000 - don’t vary over relevant range)
$ 15,000
Profit / Loss
$ 5,000
Question 7
Based on this scenario, what is the profit for a volume of 1,000 units?
In this case, first we have to find the value of revenue which is calculated by;
Number of visits = 1,000, cost per visit = $ 50
Revenue = ($50 X 1,000) = $ 50,000
Secondly, we calculate the value of variable cost, whereby; the number of visits= 1,000, cost per visit = $ 30.
Variable cost = ($30 X 1,000) = $ 30,000
Thirdly, we find the value of fixed cost that is given as $ 15,000
Then, we calculate profit simply by adding the value of variable cost and the value of fixed cost, and then we subtract from the value of revenue.
Therefore; profit = (variable cost + fixed cost) – Revenue
($ 30,000 + $ 15,000) - $ 50,000 = $ 5,000
The profit for a volume of 1,000 units = $ 5,000
This is clearly shown in the Profit / Loss Statement for Triangle Pediatrics
Revenue ($50 a visit per 1,000 visits)
$ 50,000
Less: Variable Cost ($30 a visit per 1,000 visits)
$ 30,000
Contribution Margin
$ 20,000
Less: Fixed Cost ($15,000 - don’t vary over relevant range)
$ 15,000
Profit / Loss
$ 5,000
Question 8
Based on this scenario, what are the revenues for a volume of 1,200 units?
In this case, there are some changes,
The total number of visits per year changed from 1,000 to 1,200.
The price per visit also changed by reducing by $ 5 from $ 50 to $ 45.
The fixed cost increased by $ 5,000, that is from $ 15,000 to $ 20,000.
There is no change of variable cost per visit, but the visit increased from 1,000 to 1,200
Consider the Profit / Loss Statement for Triangle Pediatrics below
Revenue ($45 a visit per 1,200 visits)
$ 54,000
Less: Variable Cost ($30 a visit per 1,200 visits)
$ 36,000
Contribution Margin
$ 18,000
Less: Fixed Cost ($20,000 - don’t vary over relevant range)
$ 20,000
Profit / Loss
($ 2,000)
The revenues for a volume of 1,200 units = $ 54,000
Question 9
Based on this scenario, what are the profits for a volume of 1,200 units?
In this case, there are some changes,
The total number of visits per year changed from 1,000 to 1,200.
The price per visit also changed by reducing by $ 5 from $ 50 to $ 45.
The fixed cost increased by $ 5,000, that is from $ 15,000 to $ 20,000.
There is no change of variable cost per visit, but the visit increased from 1,000 to 1,200
Consider the Profit / Loss Statement for Triangle Pediatrics below
Revenue ($45 a visit per 1,200 visits)
$ 54,000
Less: Variable Cost ($30 a visit per 1,200 visits)
$ 36,000
Contribution Margin
$ 18,000
Less: Fixed Cost ($20,000 - don’t vary over relevant range)
$ 20,000
Profit / Loss
($ 2,000)
The profit for a volume of 1,200 units = ($ 2,000)
Question 10
Based on the base case scenario, what is the volume required to breakeven?
First we prepare Profit / Loss Statement for Triangle Pediatrics
Revenue ($50 a visit per 1,000 visits)
$ 50,000
Less: Variable Cost ($30 a visit per 1,000 visits)
$ 30,000
Contribution Margin
$ 20,000
Less: Fixed Cost ($15,000 - don’t vary over relevant range)
$ 15,000
Profit / Loss
$ 5,000
Therefore; we find the value of contribution margin per unit
Contribution margin per unit = contribution margin/number of visits
= $ 20,000/1000 visits
= 20
To find the value of breakeven volume, we divide the value of fixed costs by the contribution margin per
Unit.
I.e., Breakeven volume = fixed cost/contribution margin per unit
= $ 15,000/20
The volume required to breakeven = 750 visits
Question 11
Based on the proposed changes in this scenario, what is the volume required to breakeven?
In this case, there are some changes,
The total number of visits per year changed from 1,000 to 1,200.
The price per visit also changed by reducing by $ 5 from $ 50 to $ 45.
The fixed cost increased by $ 5,000, that is from $ 15,000 to $ 20,000.
There is no change of variable cost per visit, but the visit increased from 1,000 to 1,200
Consider the Profit / Loss Statement for Triangle Pediatrics below
Revenue ($45 a visit per 1,200 visits)
$ 54,000
Less: Variable Cost ($30 a visit per 1,200 visits)
$ 36,000
Contribution Margin
$ 18,000
Less: Fixed Cost ($20,000 - don’t vary over relevant range)
$ 20,000
Profit / Loss
($ 2,000)
First, we calculate the value of contribution margin per unit
Therefore;
Contribution margin per unit = contribution margin/number of visits
= $ 18,000/1,200 visits
= 15
To find the value of breakeven volume, we divide the value of fixed costs by the contribution margin per
Unit.
I.e., Breakeven volume = fixed cost/contribution margin per unit
Therefore;
= $ 20,000/15
The volume required to breakeven = 1,333 visits
Question 12
What is the volume required to breakeven?
We prepare the Charity Hospital - Contribution Margin per Service table, as shown below.
Revenue ($1,000 per discharge)
$ 1,000
Less: Variable Patient Cost ($495 per discharge)
$ 495
Less: Variable G&A Cost ($5 per discharge)
$ 5
Contribution Margin per Service
$ 500
Fixed Cost ($4,000,000)
$ 4,000,000
Total variable costs = $495 + $5 = $500 per discharge
Revenue = $ 1,000 per discharge
Fixed hospital overhead costs are $4,000,000 per year.
Therefore; Contribution Margin per Service = $ 1,000 – ($ 495 + $ 5)
= $ 500
To find the value of breakeven volume, we divide the value of fixed costs by the contribution margin per service.
I.e., Breakeven volume = fixed cost/contribution margin per service
Therefore;
= $ 4,000,000/$ 500
The volume required to breakeven = 8,000 discharges
