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Ed Winslow is considering investing in a sandwich machine operation involving 50 sandwich machines located in various locations throughout the city. The machine manufacturer reports that similar sandwich machine routes have produced a sales volume ranging from 40 to 60 units per machine per month. The following information is made available to Winslow in evaluating the possible profitability of the operation.
An investment of will be required, for merchandise and for the 50 machines.
The machines have a service life of five years and no salvage value at the end of that period. Depreciation will be computed on the straight-line basis.
Sandwiches sell for an average of and will cost Winslow an average of per unit to prepare.
Owners of the buildings in which the machines are located are paid a commission of 10 cents per sandwich sold.
One person will be hired to service the machines. The salary will be per month.
Other expenses are estimated at per month. These expenses do not vary with the number of units sold.
a. Determine the unit contribution margin and the break-even volume in units and in dollars per month.
Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31:
- Gross patient service revenue from all services provided at the established billing rates of the hospital (note that this figure includes charity care of $25,000) $775,000
- Provision for bad debts 15,000
- Difference between established billing rates and fees negotiated with third-party payors (contractual adjustments) 70,000
What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31?