Deadwood Hospital has variable costs of 50% of total revenues and fixed costs of $40 million per year.There are 40,000 patient-days estimated for the next year.The break-even point expressed in total revenue is ________.
A)$10 million
B)$40 million
C)$80 million
D)$90 million

Question

Quizplus · Accepted Answer

To calculate the break-even point in total revenue, we need to find the total cost and divide it by the contribution margin (the percentage of revenue that goes towards covering the fixed costs).

Total cost = Fixed cost + Variable cost
Variable cost = 50% of total revenue
Fixed cost = $40 million

Total cost = $40 million + 0.5 x Total revenue

At the break-even point, total revenue equals total cost, so:

Total revenue = $40 million + 0.5 x Total revenue

Solving for Total revenue, we get:

Total revenue = $80 million

Therefore, the answer is C) $80 million.

Deadwood Hospital Has Variable Costs of 50% of Total Revenues