NR 630 Week 6 Assignment: Breakeven Analysis

Category: NR 630 Executive Practicum

(NR 630 Week 6 Assignment)

Purpose

The purpose of this assignment is to: To provide learners with the opportunity to develop break-even-analysis skills.

Course Outcomes

Through this assignment, the student will demonstrate the ability to: (CO#8) Delineate effective resource management and fiscal responsibilities of the nurse executive. (PO 8)

Requirements:

Answer the questions and complete the calculations required for the assignment. Submit your answers on a Word document, with the heading of Week 6 Assignment. For the questions requiring a written response, please adhere to proper grammar and syntax, and provide references. For the questions requiring calculations, show all your work and follow the format that has been provided for the calculations in the lesson for Week 6. P REPARING THE PAPER Break-Even Analysis Case Study You and several of your colleagues business partners have decided to establish an outpatient fertility clinic in your service area.

SOLUTION:

NR 630 Week 6 Assignment: Breakeven Analysis

Introduction

The NR 630 Week 6 Assignment focuses on developing breakeven analysis skills, a critical competency for managing healthcare organizations. Breakeven analysis is a financial assessment tool that helps determine the level of sales or revenue needed to cover all costs, both fixed and variable. In the context of this assignment, students will apply breakeven analysis to a case study involving the establishment of an outpatient fertility clinic. This exercise will enhance their ability to manage resources effectively and understand fiscal responsibilities, aligning with Course Outcome CO#8.

Purpose

The primary purpose of this assignment is to enable learners to:

• Develop skills in conducting breakeven analysis.
• Apply these skills to a real-world scenario involving a new healthcare venture.
• Demonstrate understanding of resource management and fiscal responsibilities within a healthcare setting.

Course Outcomes

Through this assignment, students will demonstrate the ability to:

• CO#8: Delineate effective resource management and fiscal responsibilities of the nurse executive.

By engaging in this breakeven analysis, students will gain insights into how financial decisions impact organizational viability and sustainability, crucial for nurse executives managing healthcare facilities.

Requirements

Submission Format:

• Submit responses and calculations in a Word document titled “Week 6 Assignment.”
• For written responses, adhere to proper grammar, syntax, and include references.
• For calculations, show all work and follow the provided format from the Week 6 lesson.

Break-Even Analysis Case Study:

You and several of your colleagues have decided to establish an outpatient fertility clinic in your service area. The following details are provided for the case study:

1. Fixed Costs:
   • Rent: $10,000 per month
   • Salaries: $30,000 per month
   • Utilities: $2,000 per month
   • Equipment depreciation: $3,000 per month
   • Insurance: $1,500 per month
   • Total Fixed Costs: $46,500 per month
2. Variable Costs per Patient:
   • Medical supplies: $100
   • Laboratory tests: $50
   • Medications: $80
   • Total Variable Costs per Patient: $230
3. Revenue per Patient:
   • Average fee per patient visit: $500

Tasks:

1. Breakeven Point (Units)=Fixed CostsRevenue per Unit−Variable Cost per Unit\text{Breakeven Point (Units)} = \frac{\text{Fixed Costs}}{\text{Revenue per Unit} - \text{Variable Cost per Unit}}Breakeven Point (Units)=Revenue per Unit−Variable Cost per UnitFixed Costs​Where:
   • Fixed Costs = $46,500
   • Revenue per Unit = $500
   • Variable Cost per Unit = $230
2. Breakeven Point (Dollars)=Breakeven Point (Units)×Revenue per Unit\text{Breakeven Point (Dollars)} = \text{Breakeven Point (Units)} \times \text{Revenue per Unit}Breakeven Point (Dollars)=Breakeven Point (Units)×Revenue per Unit
3. Perform a Sensitivity Analysis:Examine how changes in fixed costs, variable costs, or revenue per patient impact the breakeven point. For example, analyze the effect of a 10% increase in fixed costs or a 15% decrease in revenue per patient.
4. Prepare a Brief Report:Summarize your findings and include the following:
   • Calculations and results.
   • Analysis of how breakeven analysis informs decision-making for the outpatient fertility clinic.
   • Discussion of the implications for financial planning and resource management.

Example Calculations

1. Breakeven Point in Units:

Breakeven Point (Units)=46,500500−230=46,500270≈172 patients\text{Breakeven Point (Units)} = \frac{46,500}{500 - 230} = \frac{46,500}{270} \approx 172 \text{ patients}Breakeven Point (Units)=500−23046,500​=27046,500​≈172 patients

2. Breakeven Point in Dollars:

Breakeven Point (Dollars)=172×500=86,000\text{Breakeven Point (Dollars)} = 172 \times 500 = 86,000Breakeven Point (Dollars)=172×500=86,000

3. Sensitivity Analysis:

• New Fixed Costs = $46,500 \times 1.10 = $51,150New Breakeven Point (Units) = \frac{51,150}{500 - 230} \approx 189 \text{ patients}New Breakeven Point (Dollars) = 189 \times 500 = 94,500
• New Revenue per Patient = $500 \times 0.85 = $425New Breakeven Point (Units) = \frac{46,500}{425 - 230} \approx 155 \text{ patients}New Breakeven Point (Dollars) = 155 \times 425 = 65,875

Conclusion

Breakeven analysis is a valuable tool for assessing the financial feasibility of establishing a new healthcare venture such as an outpatient fertility clinic. By calculating the breakeven point, healthcare managers can make informed decisions about pricing, cost control, and financial planning. Understanding the breakeven point helps ensure that the clinic can achieve financial sustainability and effectively manage resources.

References

• Managerial Accounting. (2022). Breakeven Analysis. Retrieved from Investopedia
• Financial Management for Healthcare Organizations. (2021). Breakeven Analysis. Retrieved from Healthcare Financial Management Association
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.