Question

Fairview Hospitals has three divisions (service lines). They are General Clinics, Specialty Clinics and Pharmacy Services. The sales for each service line were $1,400,000 General Data, $600,000 Specialty Clinics, and $420,000 Pharmacy Services while the variable expenses for each service line (division) were $520,000, $360,000 and $280,000 respectively. The related service line (division) discretionary and committed fixed expenses are presented below: Fixed expense General Clinics Specialty Clinics Pharmacy Services Discretionary $320,000 $140,000 $160,000 Committed $190,000 $280,000 $130,000 Calculate the net income of each division and the business in total

Answer 1

Answer:

                                             General          Specialty       Pharmacy

Sales                                   $1,400,000     $600,000      $420,000

Variable cost                      $520,000       $360,000      $280,000

Contribution margin A       $880,000       $240,000      $140,000

Fixed Expenses B              $510,000        $420,000      $290,000

Net income/(Loss) (A-B)    $370,000        ($180,000)     ($150,000)