Financial Analysis

Financial Analysis

Case Study # 1

RPH'S Current Contribution Margin

Raffles Private Hospital

Contribution Margin

For the period

 

 

 

Sales

(900 * 1500 ) $ 1,350,000.00

less: Variable Cost

 

 

Direct Labor

(900 * 400) $ 360,000.00

Drugs and other consumables

(900 * 150) $ 135,000.00

Other Direct Costs

(900 * 300) $ 270,000.00

Contribution Margin

 

$ 585,000.00

RPH's Current Break-Even Point

Raffles Private Hospital

Break-Even Point

 

 

 

Break-Even Point = Fixed Cost / Contribution Margin

Break-Even Point = (30000+40000+30000+150000) / 585000

Break-Even Point = 42.7 %

Break-Even Point (in units) = 0.295 * 1300 = 385 units

Schedule Showing Extra Cost Involved in Providing Services to Patients

Raffles Private Hospital

Schedule for Extra Cost

Direct Labor

(400 * 400) $ 160,000.00

Drugs and other consumables

(400 * 150) $ 60,000.00

Other Direct Costs

(400 * 300) $ 120,000.00

Minimum Tender Bid for RPH

Raffles Private Hospital

Minimum Bid

 

 

 

Break-Even Point = Fixed Cost / Contribution Margin

Break-Even Point = (30000+40000+30000+150000) / 845000

Break-Even Point = 29.5 %

Break-Even Point (in units) = 0.27 * 1300 = 385 units

Minimum Bid = Variable cost * Break Even Sales = 850 * 385 = $ 327250

 

Impact on Profitability if RPH bid $320000

Raffles Private Hospital

Impact on Profitability

Required Bid

 

$327,250

Bid

 

$320,000

Loss

 

$7,250

Other Factors to take into consideration

Some of the other factors to be considered for this government contract are that:

Equipment Available - It is required to estimated whether equipment are available for treating further patients

Variable Cost Coverage - It should also take into consideration that following tender is covering its variable cost or not because contract is profitable if it's fixed and variable cost is covered. For accepting contract it is necessary that its variable cost covered at least.

Doctors Available - For providing further services it is necessary that hospital has extra staff and doctors available.

Case Study # 2

Calculation of ARR, PP, NPV, and IRR

ARR

Machine A

Step 1:

Annual Depreciation = 100000-25000/5 = £ 15000

 

 

 

 

 

 

 

Step 2:

 

 

 

 

 

 

Year

1

2

3

4

5

 

Inflow

$ ...