06.07.2022 - 10:25

# Triangle Pediatrics currently provides 1,000 visits per year at a price of $50 per visit. The variable cost per visit (variable cost rate) is$30, and total fixed costs are $15,000. The business manag Question: Triangle Pediatrics currently provides 1,000 visits per year at a price of$50 per visit. The variable cost per visit (variable cost rate) is $30, and total fixed costs are$15,000. The business manager suggests that Triangle Pediatrics can increase the number of visits to 1,200 per year by cutting the price per visit by $5 and increasing the fixed advertising budget by$5,000.

a. Construct the base case projected P&L statement and the projected P&L statement incorporating the proposed changes. Should Triangle Pediatrics make the suggested changes?

b. How much would visit volume need to increase in order for Triangle Pediatrics to break even with the proposed changes?

a. Base Case Projected P&L Statement: Revenue: 1,000 visits x $50 per visit =$50,000 Variable Costs: 1,000 visits x $30 variable cost rate =$30,000 Fixed Costs: $15,000 Profit: Revenue - Variable Costs - Fixed Costs =$5,000 Projected P&L Statement Incorporating Proposed Changes: Revenue: 1,200 visits x $45 per visit =$54,000 Variable Costs: 1,200 visits x $30 variable cost rate =$36,000 Fixed Costs: $20,000 ($15,000 original fixed costs + $5,000 increased advertising budget) Profit: Revenue - Variable Costs - Fixed Costs = ($2,000) Based on the projected P&L statements, Triangle Pediatrics should not make the suggested changes as they would result in a loss of $2,000. b. To break even with the proposed changes, Triangle Pediatrics would need to generate a profit of$0. This can be achieved by setting the profit equation to 0 and solving for the required number of visits: $45x -$30x - $20,000 = 0$15x = $20,000 x = 1,333.33 visits Therefore, Triangle Pediatrics would need to increase their visit volume to 1,333 visits per year in order to break even with the proposed changes. Do you know the answer? Not sure about the answer? Find the right answer to the question Triangle Pediatrics currently provides 1,000 visits per year at a price of$50 per visit. The variable cost per visit (variable cost rate) is $30, and total fixed costs are$15,000. The business manag by subject Business, and if there is no answer or no one has given the right answer, then use the search and try to find the answer among similar questions.