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In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling $14,550,400. The Gastroenterology Clinic costs data for a 12-month period from January 2013 through December 2013 were reported as follows:

Month, 2013

Number of

Patient Visits

Gastroenterology Clinic Costs, $

January

6,755

945,700

February

6,620

946,660

March

5,834

880,934

April

6,228

927,972

May

7,554

944,250

June

7,620

914,400

July

7,136

949,088

August

7,440

959,760

September

6,453

942,138

October

5,325

825,375

November

5,588

854,964

December

7,020

961,740

  1. Find the fixed and variable portion of costs using the high-low method.
  2. Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.
  3. Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.
  4. In deciding to continue (or to discontinue) a service, which revenues currently do not cover total cost, which is more important in the short run, variable cost or fixed cost? In the long run (with more service volume)? Why?
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