solution

Calculating Breakeven. Ms Jasmine Gonzales, administrative director of Physicians Associates, a group practice, has been asked if the group should begin offering mammography screenings. The following are Ms Gonzales’s projections:

Price per screening: $90

Equipment[1]: $60,000

Technicians’ salaries: $60,000

Operating costs per screening:

Supplies: $25

Developing: $10

[1] Useful life of 10 years (assume straight-line depreciation)

a. What annual volume must the unit operate at in order to break even on the service?

b. How do breakeven projections change if the group practice required a $22,000 profit?

c. Suppose reimbursement levels for mammography services provided only $65 per screening. How many screenings per year would the group practice have to perform to break even? (Assume no profit.)