Assignment 2: Course Project Task 4—Analyze Cost Behavior and Calculate Breakeven Analyses In this assignment, you will carry out a profit analysis for the SMH facility. Focus the analysis on a...

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Answered Same DayDec 24, 2021

Answer To: Assignment 2: Course Project Task 4—Analyze Cost Behavior and Calculate Breakeven Analyses In this...

David answered on Dec 24 2021
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Running Head: BREAK EVEAN ANALYSIS – SMH HOSPITAL 1
Breakeven Analysis – SMH Hospital
Student’s Name
Course Name
University Name
Date
BREAK EVEAN ANALYSIS – SMH HOSPITAL 2
Breakeven Analysis – SMH Hospital
Introduction
While defining a business strategy an organization must perform breakeven analysis as it
will help them in deciding the future course of actions and plan accordingly. In order to leverage
breakeven analysis an organization must prepare its budget in advance which will help in
extracting the relevant figures on the basis of which breakeven analysis will be performed.
Breakeven analysis is performed to determine the minimum no. of units that must be sold by the
organization in order to cover all its fixed costs, while defining business strategy the company
can easily estimates the cost and benefits of each strategy and by the help of such figures can
choose the right strategy based on the expected demand of the product or service in the market.
Breakeven point is the point where the company has no profit and no loss situation. It is
the point where the total sales of the company is equal to the total costs incurred by the company
for the particular project. All the sales done after the breakeven point will result in profits.
Contribution per unit = Sales price per unit minus variable cost per unit (Finkler, Ward &
Calabrese, 2011)
P/V Ratio = Contribution per unit/ Sales price per unit * 100
Breakeven point= Fixed costs/contribution per unit or p/v ratio.
For analyzing the breakeven point, it is important for the hospital to recognize the
variable and fixed costs. Variable costs are the costs which vary with the units produced.
Variable costs are costs that are directly related to production units. Variable costs generally
include direct labor and direct materials. Fixed Cost can be defined as those cost which does not
change with the change in production or sales level, such as rent, property tax, insurance, or
interest expense.
BREAK EVEAN ANALYSIS – SMH HOSPITAL 3
Segregation of costs incurred by SMH hospital
The costs and expenses that are incurred by SMH hospital are classified under...
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