Days of Our Lives Hospital has total variable costs of 90% of total revenues and fixed costs of $50 million per year. There are 50,000 patient- days estimated for next year. What is the break- even point expressed in total revenue?
A) $500 million is the break- even point.
B) $12.5 million is the break- even point.
C) $50 million is the break- even point.
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

The break-even point in total revenue is where total revenue equals total costs (fixed plus variable). With variable costs at 90% of revenue, the contribution margin is 10%. To cover $50 million in fixed costs, total revenue must be $500 million ($50 million / 0.10).

Days of Our Lives Hospital Has Total Variable Costs of 90