1. From the statement, is the organization making a profit or loss? How much is
ID: 2328308 • Letter: 1
Question
1. From the statement, is the organization making a profit or loss? How much is that
profit or loss? Show the calculations.
2. What is the contribution margin? Show the calculations.
3. What is the break even analysis for this organization? Show the calculations.
MedStar Health, Inc. Consolidated Statements of Operations and Changes in Net Assets For the Three and Six Months Ended December 31, 2017 and 2016 (Dollars in millions) Six Months Ended 2017 Actual Budget Actual Three Months Ended December 31 2016 Actual December 31 2017 2016 2017 Actual 2017 Operating revenues: Net patient service revenue Provision for bad debts S1,242.4 S1.200.6 1,169.5 $2,410.7 $2,398.6 $2,321.3 (55.1) (56.3) (54.) (108.8 Total net patient service revenue, net of provision for bad debts 1,1873 1,1443 1,115.4 2,3019 2,286.3 2,209.9 Premium revenue Other operating revenue 142.7 209.9 202.7 52.6 1,394.2 1,406.8 1,368.8 422.0 399.6 94.7 2,778.2 2,810.4 2,704.2 363.1 113.2 102.1 Net operating revenues Operating expenses Personnel 774.3 748.2 737.8 509.3 1,488.7 1,449.2 385.3 378.2 489.0 455.6 242.4 267.3 255.8 24.9 22.4 96.0 es Purchased Other operating Interest expense Depreciation and amortization 203.3 191.8 188.9 207.9 245.2 231.4 118.6 134.6 134.2 392.7 447.5 services 11.5 125 52.5 22.8 104.9 56.2 Total operating expenses 1388.5 1,352.5 2,719.6 2,766.9 2,657.2 Earnings from operations 26.1 18.3 16.3 58.6 43.5 47.0 Non-operating gains (losses): Investment income Net realized gains on sale of investments Unrealized gains on derivative instruments Unrealized gains (losses) on investments Other 5.8 17.06.3 4.8 4.9 10.4 24.6 9.5 7.3 12.5 21.4 40.2 43.3 4.3 33.8 (3.2) 54.3 10.6 (13.2) 85.8 (6.6) 115.6 Total non-operating gains (losses) 66.3 Excess of revenue over expenses S80.4 S39.9 S18.4 $174.2 S86.8 $113.3Explanation / Answer
I have not included interest expense in the fixed expenses, as it may not be operating expense for Break-even analysis purpose. Requirement 1 Organization is making profit, which can be evidenced from following calculations 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Net Operating Revenue A 1394.20 1406.80 1368.80 2778.20 2810.40 2704.20 Less : Operating Expenses B 1368.10 1388.50 1352.50 2719.60 2766.90 2657.20 Operating profit A-B 26.10 18.30 16.30 58.60 43.50 47.00 Requirement 2 The contribution margin is as follows 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Net Operating Revenue A 1394.20 1406.80 1368.80 2778.20 2810.40 2704.20 Less : Variable Expenses Personnel 774.30 748.20 737.80 1509.30 1488.70 1449.20 Supplies 203.30 191.80 188.90 392.70 385.30 378.20 Purchased Services 207.90 245.20 231.40 447.50 489.00 455.60 Other operating 118.60 134.60 134.20 242.40 267.30 255.80 Total variable expenses 1304.10 1319.80 1292.30 2591.90 2630.30 2538.80 Contribution Margin B 90.10 87.00 76.50 186.30 180.10 165.40 Requirement 3 The breakeven analysis is as follows 2017 2016 2017 2016 Three Months ended Six Months ended Actual Budgeted Actual Actual Budgeted Actual Contribution Margin Ratio A 6.46 6.18 5.59 6.71 6.41 6.12 (B/A% in Requirement 2) Fixed Operating Expenses Depreciation and amortization 52.50 56.20 49.10 104.90 111.70 96.00 Total Fixed Operating Expenses B 52.50 56.20 49.10 104.90 111.70 96.00 Break Even sales in dollars B/A% 812.3807 908.7605 878.537 1564.322 1743.041 1569.548
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