Question

Fairview Hospitals has three divisions (service lines). They are General Clinics, Specialty Clinics and Pharmacy Services. The sales for each service line were $1,400,000 General Data, $600,000 Specialty Clinics, and $420,000 Pharmacy Services while the variable expenses for each service line (division) were $520,000, $360,000 and $280,000 respectively. The related service line (division) discretionary and committed fixed expenses are presented below: Fixed expense General Clinics Specialty Clinics Pharmacy Services Discretionary $320,000 $140,000 $160,000 Committed $190,000 $280,000 $130,000 Calculate the net income of each division and the business in total

Answer 1

General Specialty Pharmacy

Sales $1,400,000 $600,000 $420,000

Variable cost $520,000 $360,000 $280,000

Contribution margin A $880,000 $240,000 $140,000

Fixed Expenses B $510,000 $420,000 $290,000

Net income/(Loss) (A-B) $370,000 ($180,000) ($150,000)