Case #6 Columbia Memorial Hospotal

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CASE6

CASE 6 Student Version Copyright 2010
8/24/09 by FACHE
COLUMBIA MEMORIAL HOSPITAL
Breakeven Analysis
This case illustrates the use of breakeven analysis to help make operating decisions. Note that the model
extends out to Column AR.
The model consists of a complete base case analysis--no changes need to be made to the existing
MODEL-GENERATED DATA section. However, all relevant values in the INPUT DATA section of the student
version have been replaced with zeros. Thus, students must determine the appropriate input values and
enter them into the model. These cells are colored red. When this is done, any error cells will be corrected
and the base case solution will appear. Note that the model does not contain any risk analyses, so students
will have to create their own if required by the case. Furthermore, students must create their own graphics
(charts) if needed to supplement those included with this model.
The instructor version of the model contains three graph sheets. Figure 1 plots total monthly revenue, total
monthly costs, and total monthly profit versus number of incremental visits without the new marketing program.
Figure 2 plots the same information with the new marketing program, and Figure 3 contains the incremental
marketing program plot.
INPUT DATA:
Historical Financial Data:
Monthly Averages
CY 2009 Jan 2010 Feb 2010 2009 Jan/Feb10 Combined
Number of visits 14,522 1,365 1,335 1,210 1,350 1,230
Net revenue $548,747 $55,028 $54,748 $45,729 $54,888 $47,037
Salaries and wages $154,250 $13,540 $13,544 $12,854 $13,542 $12,952
Physicians fees 192,000 18,000 18,000 16,000 18,000 16,286
Malpractice insurance 31,440 3,215 3,215 2,620 3,215 2,705
Travel and education 5,365 538 665 447 602 469
General insurance 8,112 843 843 676 843 700
Subscriptions 189 0 0 16 0 14
Electricity 11,820 1,124 1,029 985 1,077 998
Water 1,260 135 142 105 139 110
Equipment rental 1,260 105 105 105 105 105
Building lease 155,745 12,500 12,500 12,979 12,500 12,910
Other operating expenses 103,779 8,152 7,923 8,648 8,038 8,561
Total operating expenses $665,220 $58,152 $57,966 $55,435 $58,059 $55,810
Net profit (loss) ($116,473) ($3,124) ($3,218) ($9,706) ($3,171) ($8,773)
Gross margin (%) -21.2% -5.7% -5.9% -21.2% -5.8% -18.7%
Pro Forma Average Month:
Number of visits 0
Net revenue $0
Salaries and wages $0
Physicians fees 0
Malpractice insurance 0
Travel and education 0
General insurance 0
Subscriptions 0
Electricity 0
Water 0
Equipment rental 0
Building lease 0
Other operating expenses 0
Total operating expenses $0
Net profit (loss) $0
Gross margin (%) 0.0%
Incremental Monthly Costs:
Number of Additional Visits per Day
0 1-10 11-20 21-30 31-40
Variable costs:
Medical supplies $0.00 per visit
Administrative supplies 0.00 per visit
Total variable costs per visit $0.00 per visit
Semifixed costs:
Salaries and wages $0 $0 $0 $0
Physician fees 0 0 0 0
Total monthly semifixed costs $0 $0 $0 $0 $0
Fixed costs:
Marketing assistant's salary $0 $0 $0 $0 $0
Advertising expenses 0 0 0 0 0
Total monthly fixed costs $0 $0 $0 $0 $0
MODEL-GENERATED DATA:
Breakeven Analysis:
Without New Marketing Program:
Maximum additional monthly visits 0 150 300 450 600 750 900 1050 1200
Maximum additional daily visits 0 5 10 15 20 25 30 35 40
Incremental variable costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental semifixed costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Total incremental monthly costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental cost/visit NA $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Summary Financial Statements:
Number of Additional Visits per Day
0 5 10 15 20 25 30 35 40
Total monthly visits 0 150 300 450 600 750 900 1,050 1,200
Total daily visits 0 5 10 15 20 25 30 35 40
Net revenue per visit $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total net monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Total incremental costs 0 0 0 0 0 0 0 0 0
Current + incremental costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Monthly profit (loss) $0 $0 $0 $0 $0 $0 $0 $0 $0
Gross margin (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Graphics Input:
Number of Incremental Visits per Day
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Total daily visits 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
Total monthly visits 1,350 1,380 1,410 1,440 1,470 1,500 1,530 1,560 1,590 1,620 1,650 1,680 1,710 1,740 1,770 1,800 1,830 1,860 1,890 1,920 1,950 1,980 2,010 2,040 2,070 2,100 2,130 2,160 2,190 2,220 2,250 2,280 2,310 2,340 2,370 2,400 2,430 2,460 2,490 2,520 2,550
Total monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental variable costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental semifixed costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Incremental fixed costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total incremental costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Graphical recap:
Incremental visits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Total monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total monthly costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Monthly profit (loss) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
With New Marketing Program:
Maximum additional monthly visits 0 150 300 450 600 750 900 1050 1200
Maximum additional daily visits 0 5 10 15 20 25 30 35 40
Incremental variable costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental semifixed costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental fixed costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Total incremental monthly costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental cost/visit NA $0 $0 $0 $0 $0 $0 $0 $0
Summary Financial Statements:
Number of Additional Visits per Day
0 5 10 15 20 25 30 35 40
Total monthly visits 0 150 300 450 600 750 900 1,050 1,200
Total daily visits 0 5 10 15 20 25 30 35 40
Net revenue per visit $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total net monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Total incremental costs 0 0 0 0 0 0 0 0 0
Current + incremental costs $0 $0 $0 $0 $0 $0 $0 $0 $0
Monthly profit (loss) $0 $0 $0 $0 $0 $0 $0 $0 $0
Gross margin (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Graphics Input:
Number of Incremental Visits per Day
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Total daily visits 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
Total monthly visits 1,350 1,380 1,410 1,440 1,470 1,500 1,530 1,560 1,590 1,620 1,650 1,680 1,710 1,740 1,770 1,800 1,830 1,860 1,890 1,920 1,950 1,980 2,010 2,040 2,070 2,100 2,130 2,160 2,190 2,220 2,250 2,280 2,310 2,340 2,370 2,400 2,430 2,460 2,490 2,520 2,550
Total monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental variable costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Incremental fixed costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total incremental costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Graphical recap:
Incremental visits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Total monthly revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total monthly costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Monthly profit (loss) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Expanded Marketing Program Incremental Analysis:
Added daily visits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Incremental monthly rev $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Incremental monthly costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Incr monthly profit (loss) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
END
&A
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To complete this input, choose the historical values from above that represent the best estimates for the average month for the entire coming year.

Figure 1

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Total Monthly Profit
Figure 1 Breakeven without New Marketing Program
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Figure 2

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Total Monthly Revenue
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Total Monthly Profit
Figure 2 Breakeven with New Marketing Program
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Figure 3

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Total Monthly Revenue
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Figure 3 Incremental Breakeven of Marketing Program
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