Quantitative Anaylsis in Business (Problems)

[BFrank00]

Homework Statement

Eric runs a chiropractic center. The annual fixed costs for operating Chiro-Care clinic is $222,000. The variable cost per patient treated is $555. The price billed for each visit is $136. Currently, he has around 2500 visits a year?
a) Is he making a profit?
b) He doesn't think he can increase demand, so he is thinking about a cost-cutting measure for his variable costs. What would his variable costs to be in order to break even at 2500 visits a year?

Homework Equations

The Attempt at a Solution

 

[Valkarie]

a) He is not making a profit. b) $136 x 2500 = $340,000 and $222,000 + $340,000 = $562,000. The variable cost must be $562,000 - $222,000 = $340,000. The variable cost per patient would need to be $340,000/2500 = $136.