NR533 Week 5 Break-even Analysis Assignment

Week 5: Break-even Analysis

Assignment Guidelines with Scoring Rubric

Purpose

The purpose of this assignment is to:

To provide learners with the opportunity to develop break-even-analysis skills.

Requirements:

Answer the questions and complete the calculations required for the assignment.

Submit your answers on a Word document, with the heading of Week 5 Assignment.  For the questions requiring a written response, please adhere to proper grammar and syntax, and provide references.  For the questions requiring calculations, show all your work and follow the format that has been provided for the calculations in the lesson for Week 5.

1. When performing calculations, standard rounding rules apply. If the number to the right of the decimal is less than 5, round down to the nearest whole number, e.g., 33.4 = 33 If the number to the right of the decimal is 5 or greater, round up to the nearest whole number, e.g. 33.5 =34.

2. Read the question carefully. Pay close attention to the units be asked and keep them consistent. For example, hours vs FTEs; days vs months vs years.

3. Provide ALL formulas with references. Designate which formula associates with which source. It is not sufficient to simply list the source at the beginning of the section. Write out the formula used BEFORE filling in the numbers. Formulas used should be taken from one of the required resources for this course.

Example: Total Contribution Margin (CM) = (CM) category 1 + CM cat 2 + CM 3

Leger, J.M. & Dunham-Taylor, J. (2018). Financial management for nurse managers: Merging the heart with the dollar, 4th Ed. Burlington, MA: Jones-Bartlett.

Preparing the paper

Break-Even Analysis Case Study

You and several of your colleague business partners have decided to establish an outpatient fertility clinic in your service area. All of you are very familiar with this patient population base, have completed an extensive market analysis that demonstrated a great need for the service, and are comfortable with setting up a business and the costs associated with this special group of patients.

As part of the business plan, you and your partners will need to convince stakeholders that this new service endeavor will be viable. They will want to know how many patients visits annually will need to occur and how long it will take for the service to be at least cost neutral or profitable. To provide them with this information you will perform a break-even analysis. Use the following data, conduct the analysis accounting for the contribution margin of each patient acuity category.

·         Fixed Costs: $9,788,000 (start-costs, specialty physicians, anesthesiologists, APNs, staff  nurses and other staff salaries, specialty equipment, other miscellaneous)

·         Variable costs: $500/patient visit (specialty equipment, oxygen supplies, other miscellaneous)

·         Clinic days: Monday-Saturday- 312 days/year

·         Projected patient visits per year: 7480

·         Patient charges by patient acuity category:

o   Simple (25%)------------$2000/visit

o   Moderate (60%)--------$6500/visit

• Complex (15%)---------$10,000/visit

Break-even Analysis Data Table
Acuity Category	Percentage %	Charge per Visit	Visits per Year	Charges per Year	Visits per Day	Charges per Day		Contribution Margin
Simple	25%	$2000
Moderate	60%	$6500
Complex	15%	$10,000
Expected Total Daily Charges
Expected Total Daily Revenue
Break Even point in days
Break Even point in visits

 

1.    Describe your approach to this case study. In addition to the numbers given, what do you need to know before you can calculate the break-even analysis?

2.    Perform the calculations needed for the break-even analysis. Show your work, formulas used, and reference the formula. When calculating the patient visits per day, round to the nearest whole. After you’ve completed the calculations, record your results in the appropriate place in the table.

3.     How many patient visits are expected per day?

4.    What is the contribution margin of each category of patient?

5.    Based on the data and your calculations, what is the expected daily revenue?

6.    How long (in days, months, or years) will it be before the return on investment begins?

7.    How many patient visits will be required to reach the break-even point?

8.    Discuss your analysis. Is the project viable and profitable service? Does the analysis support moving forward with the business? Cite specific data from you analysis to support your interpretation.

 

Approach to Break-Even Analysis	5	5%	Approach to Break-even analysis is clearly articulated and contains elements needed to address the scenario
Calculate the number of patients/category served per year and day.	15	15%	Number of patients served by the fertility clinic is correctly calculated per year and day for each type/category. Formulas are correctly shown, used, and referenced. Calculations are shown
Calculate the contribution margin for each patient category	30	30%	For each of the three patient/categories the contribution margin is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown.
Calculate the number of days to break-even.	10	10%	Time to break-even in days is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown
Calculate the break-even quantity (number of visits).	15	15%	The break-even quantity (number of visits) is correctly calculated. Formulas are correctly shown, used, and referenced. Calculations are shown.
Analysis of break-even analysis	20	20%	Break-even analysis is clearly articulated. Includes elements potential for viability and profitability of service, recommendation for continuing the business. Specific data from the analysis is used to support your interpretation.
Writing conventions, format, and reference citations	5	5%	Writing is clear concise without grammatical and spelling errors. All references are correctly cited (if applicable) and written.