Break even

Breakeven is the aim at which the community is non generating either profits or losses. This is the point at which the company is generating fair(a) the train of revenue which compensates for both the covariant cost and the set(p) be. Vari adequate to(p) cost fluctuate with the take of patients arriving for the s sewers. The greater the fall of incoming patients for magnetic resonance imaging translates, the greater the inconsistent cost. However the decided costs, which involve the take away payments, which are periodic, will not alter regardless of the number of patients coming in for the scan.T presentfore, succession greater number of patients intend greater inconsistent costs, it also agent that there will be greater scope for the company to treat the laid costs. That is of course given the fact that the damage is higher than per unit variable cost. That is the subject area under the turn over scenario. The expenditure that severally customer pays for an MRI scan is $2100 while the cost that the company has to incur for apiece scan is $1200. The passing between the price and the variable cost goes towards practical application the stiff costs. That is why the breakeven comparability stands as it does.As mentioned in advance, breakeven is the point at which there are neither profits nor loses for the company. As a impression profit at this point can be considered as zero. The level of gross revenue at which profit is zero style that under the present circumstances, the number of MRI scans that the infirmary has per divisioned cover for not altogether the variable costs entirely fixed costs as well. In the present scenario the payment that the hospital receives in increase for performing the MRI scan is $2100 which is oftentimes higher than the cost of performing that scan which is $1200. Therefore, the company will have no problem in covering for the variable costs.What the hospital has to worry about is covering the f ixed cost. Therefore the objective here is to determine the number of patients at which the difference between arrive revenue and total variable costs equals the fixed costs. The equation generates the 100 patients that R shape moldiness scan each month to cover not only the variable costs of performing each scan but also the fixed costs of run the MRI scan equipment. 100 patients evidence the minimum number of patients that R Squared must scan each month in order to be able to stay in business, i.e. get butt both the variable cost and the fixed costs. However ordinary Hospital is ensuring cxxv patients each month. This is very good for R Squared because at that number of patients, the hospital will be generating a level of profit that is higher than the $10000 measured in question 2. Therefore R Squared will accept this contract. motility 4 If R Squared does not accept this contract it could reach an covenant with General Hospital whereby part of the costs for operating t he equipment could be borne by General Hospital.This will reduce both the variables costs and the fixed costs for R Squared. In that scenario the attention of the company could afford to take for a lower number of patients as it has to cover for a lower level of costs. Of course since 125 patients on a monthly basis means near $22500 of profits, there is no reason for the heed not to accept this contract. However the management could be targeting a higher level of profits from its MRI division. In that case, a strategic alliance in the form of cost sharing as mentioned before could help both parties reach an agreement.