Business Finance Homework Help

Scenario: Hopkins Chief Financial Officer presents you with the following information and asks for your advice on the issues described below.

Open MRI Clinic Budget

Information for Year 2004 

Budgeted Revenue Per Unit $175

Budgeted Volume in Units 5,000

Budgeted Total Variable Costs $375,000

Budgeted Total Fixed Costs $700,000

Table 7: Open MRI Clinic Budget

a. Is the Clinic expected to have income for Year 2005? Why or why not? Support your opinion with any applicable calculations.

b. Notwithstanding your answer to “a,” assume that the Clinic will not have a positive income figure. Discuss, with the CFO, various alternatives to having the Clinic show at least zero net income for the year. Assume that any of the above budgeted figures can be altered. (Hint: There are four (4) solutions based upon changing each variable in the break-even formula). Show all calculations.

c. Finally, the CFO asks you to estimate the volume in patient visits that must occur in order for the Clinic to have a $100,000 profit for the year. In your answer, also indicate what revenue level would be required to achieve the $100,000 profit. Show all calculations.