Answer the following questions using the information below:
Dr Charles Hunter,MD,performs a certain outpatient procedure for $1000.His fixed costs are $20 000,while his variable costs are $500 per procedure.Dr Hunter currently plans to perform 200 procedures this month.
-What is the budgeted operating profit for the month assuming that Dr Hunter plans to perform the procedure 200 times?

Question

Quizplus · Accepted Answer

The formula for calculating operating profit is as follows:
Operating profit = Revenue - Total costs
Total costs = Fixed costs + Variable costs
Variable costs per procedure = $500
Fixed costs = $20,000
Total costs = Fixed costs + (Variable costs per procedure x Number of procedures)
Total costs = $20,000 + ($500 x 200)
Total costs = $20,000 + $100,000
Total costs = $120,000
Revenue = Procedure cost x Number of procedures
Revenue = $1000 x 200
Revenue = $200,000
Operating profit = Revenue - Total costs
Operating profit = $200,000 - $120,000
Operating profit = $80,000

Therefore, the budgeted operating profit for the month assuming that Dr Hunter plans to perform the procedure 200 times is $80,000.
The best choice is C, as it is the correct answer to the question.

Answer the Following Questions Using the Information Below