Question

You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows:

Answer 1

Answer:

a.  clinic's projected P&L statement.

Revenues                                  400,000

Less Expenses:

Wages and benefits               (220,000 )

Rent                                             (5,000 )

Depreciation                             (30,000 )

Utilities                                        (2,500 )

Medical supplies                      (50,000)

Administrative supplies            (10,000)

Net Income or (loss) before tax 182,500

Income tax at 30%                     (54,750)

Income or (loss)                          127,750

b. 9,184 visits

c. 12,125 visits

Explanation:

Fixed Costs = 220,000 + 5,000 + 30,000 + 2,500 + 54,750

                    = $312,250

Contribution = Sales - Variable Costs

                     = $400,000 - ($50,000+$10,000)

                     = $340,000

Contribution per unit = $340,000 / 10,000 visits

                                   = $34

Break even point = Fixed Costs / Contribution per unit

                             = $312,250 / $34

                             = 9,184 visits

Units for a Profit target = Fixed Costs + Target Profit / Contribution per unit

                                      = ($312,250 + $100,000) / $34

                                      = 12,125 visits