Case Study Of Medi-Exam Medical Practice

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Recommended: Chapter 1 introduction of financial management

Dr. Molloy, owner of Medi-Exam Health Services (MEHS), has a seemingly “good problem” within his medical practice. Based on an income statement for the month of August, MEHS had profited $4,000 more than estimated by the profitgraph put together by his accountant. Although this may seem okay due the nature of estimation that comes with profitgraph analysis, Dr. Molloy needs to investigate and understand the root of the discrepancy between the outputs.

In order to investigate this issue, Dr. Molloy must first identify some key financial components within his medical practice. From the information given in the case summary and profitgraph, the following can be determined:

- Price per examination = $160

- For 500 physicals conducted, revenues …show more content…

Molloy will also need to calculate another important financial component that represents the difference between unit price and variable cost. This ratio is known as the contribution margin. From Chapter 16, the contribution margin “is the difference between the unit-selling price and the variable cost per unit” (Anthony, Hawkins, Merchant). In the case of MEHS, the unit contribution is as follows:

- Contribution margin = Price/physical – variable cost/physical = $160 – ($32,000/500 physicals) o Contribution margin = 160 – 64 = $96

With this information, Dr. Molloy can now determine the volume of physicals that MEHS must conduct in order to begin making a profit. Again from Chapter 16, the formula to calculate the break-even volume is:

Break-even volume (units) = Fixed costs/Unit

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