Lakeside Hospital: A Breakeven Analysis

Thus, the fair sh be of the disk overhead for the dialysis unit is $148,935 (refer to the exhibit on the following page).

3. Should the dialysis unit overlook 50 percent of its case load as a consequence of the changing Medicare practices, the probability is that the dialysis unit would not be able to cover its fixed expenses on the basis of on-line(prenominal) financial assumptions. In part, however, this problem could be overcome by reducing whollyocated cost to the dialysis unit based on its swallow activity take. In this case, the break still volume would dro

4. Dr. Newell should press the hospital to retain the dialysis unit.

Breakeven = $680,733/(1 - .

393) = $1,121,147

Total fixed costs for the dialysis unit are the $521,798 in direct expenses (that cover all direct costs other than medical supplies and purchased lab services) positively charged allocated costs of $148,935, for total fixed costs of $680,733. Total protean costs are the $518,282 for medical supplies and purchased lab services. Total revenues are $1,319,280 (5,736 treatments times $230). The variable cost ratio is .393 ($518,282/$1,319,280). The breakeven revenue level is as follows:

p to a level that could be met even with the reduced expectations. At the current level of operations, the dialysi
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