Break even

Breakeven is the smirch at which the comm unit of measurementy is not generating e very dineros or losses. This is the point at which the corporation is generating just the take aim of tax revenue which compensates for twain the variable star quantity courts and the obdurate be. Variable appeals fluctuate with the level of patients arriving for the tires. The great the flake of incoming patients for magnetic resonance imaging looks, the greater the variable cost. However the decided be, which involve the lease payments, which are periodic, forget not vary regardless of the quash of patients coming in for the scan. thence, while greater quash of patients means greater variable costs, it also means that in that location pass on be greater scope for the order to persist in the heady costs. That is of course effrontery the fact that the price is higher(prenominal) than per unit variable cost. That is the case under the get scenario. The price that separately customer pays for an magnetic resonance imaging scan is $2100 while the cost that the company has to incur for each(prenominal) scan is $1200. The expiration between the price and the variable cost goes towards covering the fixed costs. That is why the breakeven comparability stands as it does.As mentioned before, breakeven is the point at which there are neither profits nor loses for the company. As a result profit at this point can be considered as zero. The level of sales at which profit is zero means that under the leave circumstances, the number of magnetic resonance imaging scans that the hospital has performed cover for not plainly the variable costs but fixed costs as well. In the present scenario the payment that the hospital receives in return for performing the magnetic resonance imaging scan is $2100 which is much higher than the cost of performing that scan which is $1200. Therefore, the company volition have no problem in covering for the variable costs.What the hospital has to relate about is covering the fixed cost. Therefore the objective here is to determine the number of patients at which the difference between amount revenue and total variable costs equals the fixed costs. The equation generates the 100 patients that R Squared must scan each month to cover not only the variable costs of performing each scan but also the fixed costs of operating the MRI scan equipment. 100 patients indicate the minimum number of patients that R Squared must scan each month in secern to be able to stay in business, i.e. get back both the variable cost and the fixed costs. However ordinary hospital is ensuring cxxv patients each month. This is very good for R Squared because at that number of patients, the hospital lead be generating a level of profit that is higher than the $10000 calculated in indecision 2. Therefore R Squared will pack this involve. Question 4 If R Squared does not accept this contract it could reach an agreement with Genera l Hospital whereby part of the costs for operating the equipment could be borne by General Hospital.This will fell both the variables costs and the fixed costs for R Squared. In that scenario the management of the company could afford to accommodate a rase number of patients as it has to cover for a lower level of costs. Of course since 125 patients on a monthly flat coat means nearly $22500 of profits, there is no reason for the management not to accept this contract. However the management could be targeting a higher level of profits from its MRI division. In that case, a strategic alliance in the form of cost overlap as mentioned before could help both parties reach an agreement.