Tranquility Care provides home healthcare services at an average price of $70 per hour and incurs variable costs of $45 per hour. Assume average fixed costs are $3,600 a month. (Round your answer to the nearest whole unit.)
1. What is the number of hours that must be billed to reach the breakeven point?
2. If the company desires to make a profit of $2,000, how many hours must be completed?
3. The company thinks it can reduce fixed costs to $3,400, but variable cost will increase to $48 per hour.
The price per unit will not change. What is the new breakeven point in hours?
1. Breakeven =(Fixed costs + Target profit) / Contribution margin per unit
Breakeven = ($3,600 + 0) / $25 = 144
2. Breakeven = (Fixed costs + Target profit) / Contribution margin per unit
Breakeven = ($3,600 + $2,000) / $25 = 224
3. Breakeven = (Fixed costs + Target profit) / Contribution margin per unit
Breakeven = ($3,400 + 0) / $22 = 155
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