Question

1. Dr. Gulakowicz is an orthodontist. She estimates that adding two new chairs will increase fixed costs by $150,000, including the annual equivalent cost of the capital investment and the salary of one more technician. Each new patient is expected to bring in $3,000 per year in additional revenue, with variable costs estimated at $1,000 per patient. The two new chairs will allow Dr. Gulakowicz to expand her practice by as many as 200 patients annually. How many patients would have to be added for the new process to break even?

Answer 1

The break-even point would be 50 patients. This is calculated by taking the fixed costs of $150,000 and dividing it by the difference between the revenue per patient ($3,000) and the variable costs per patient ($1,000), which is $2,000. 150,000/2,000 = 75. Therefore, 75 patients would need to be added for the new process to break even.