The Projected P&L Statement (2)
Posted on April 27, 2009 - Filed Under Finance
The projected P&L statement used in CVP analysis contains four variables— three of the variables are assumed and the fourth is calculated. In Table 5.4, the assumed variables are expected volume (75,000 visits), expected price ($100 per visit), and expected costs (delineated in terms of the clinic’s cost
structure). Profit, the fourth variable, is calculated on the basis of the three assumed variables.
The Table 5.4 base case projected P&L statement represents only one point on the Figure 5.3 CVP model. This point is shown by the dotted vertical line at a volume of 75,000 patient visits. Moving up along this dotted line, the distance from the X-axis to the horizontal fixed costs line represents the $4,967,462 fixed costs. The distance from the fixed costs line to the total costs line represents the $2,113,500 total variable costs. The distance between the total costs line and the total revenues line represents the $419,038 profit.
As in previous figures, the graph in Figure 5.3 is not drawn to scale because it will not be used to develop numerical data. Rather, it provides the clinic’s managers with a pictorial representation of Atlanta’s projected financial future.
Taken From : HEALTHCARE FINANCE
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