Use the following scenario to discuss the issues below. (30 points) (A 2-page response is required.)
Scenario: Hopkins Chief Financial Officer presents you with the following information and asks for your advice
on the issues described below.
Open MRI Clinic Budget
Information for Year 2004
Budgeted Revenue Per Unit $175
Budgeted Volume in Units 5,000
Budgeted Total Variable Costs $375,000
Budgeted Total Fixed Costs $700,000
Table 7: Open MRI Clinic Budget
a. Is the Clinic expected to have income for Year 2005? Why or why not? Support your opinion with any
applicable calculations.
b. Notwithstanding your answer to “a,” assume that the Clinic will not have a positive income figure. Discuss,
with the CFO, various alternatives to having the Clinic show at least zero net income for the year. Assume that
any of the above budgeted figures can be altered. (Hint: There are four (4) solutions based upon changing
each variable in the break-even formula). Show all calculations.
c. Finally, the CFO asks you to estimate the volume in patient visits that must occur in order for the Clinic to
have a $100,000 profit for the year. In your answer, also indicate what revenue level would be required to
achieve the $100,000 profit. Show all calculations
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