Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are relevant data estimates:
Variable cost per visit $5.00
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected annual utilization 10,000
a. What per-visit price must be set for the service to break even? To earn an annual profit of $100,000?
b. Repeat Part a, but assume that the variable cost per visit is $10.
c. Return to the data given in the problem. Again repeat a, but assume that direct fixed costs are $1,000,000 in direct fixed costs.