Conduct Break-Even Analysis in the following two scenarios:

Question

R Squared is a mobile diagnostic imaging company that performs MRI scans of patients at hospitals and clinics that cannot afford their own scanners. General Hospital has contacted R Squared regarding a contract for services. Accountants at R Squared have calculated the variable cost per scan at $1,200. The fixed cost per month is $90,000 (Cost of MRI lease payments and service). The accepted price charged in the community for an MRI scan is $2,100.

R Squared must charge General Hospital $200 less than the community price in order to get the contract.

1. Approximately how many patients must R Squared scan at General Hospital to break even for a given month?

2. Approximately how many patients will General Hospital have to guarantee for R Squared to make a monthly profit of $10,000?

3. Assuming that General Hospital can guarantee 125 patients per month, will R squared accept the contract?

4. If not, what can General Hospital or R Squared do to reach an agreement?

Take a shot. Questions 1 and 2 are simple algebra.