BHMC 413 Fiscal Management
Professor Anthony Geron
The purpose of this paper is to show how to calculate the break-even point for an organization. Richmont Terrace’s memory care community will be used as the sample organization to help explain how to find the break-even point in Richmont Terrace’s memory care community. This paper will also discuss how the break-even analysis information can be useful for the organization when the managers look at planning and budgeting. The break-even point is the point when the contribution margin (net revenues minus variable costs) equals the fixed cost. The break-even information will help any organization to ensure the organization will be able to cover all its expenses and begin to make a profit.
Richmont Terrace is a brand-new 77 bed assisted living and memory care facility located in Bellevue, Nebraska. Richmont Terrace is a retirement community that accommodates elderly people ages 55 and older. This paper will take a look at Richmont’s memory care community and describe its break-even point. In the memory care community at Richmont Terrace there are 24 rooms and each resident is provided with a specialized care plan. The memory care community at Richmont houses residents with Alzheimer’s and/or Dementia.
How to Calculate the Break-Even Point
According to Baker & Baker (2014), “The break-even point is the point when the contribution margin (net revenues minus variable costs) equals the fixed cost.” Richmont Terrace has 24 rooms and each resident pays an average of $5,400 a month making the monthly average revenue $128,600 a month. The variable cost the community occurs are items, such as food for the residents for meals a...
... middle of paper ...
... margin (net revenues minus variable costs) equals the fixed cost. To calculate the contribution margin take the net revenues minus variable costs. To find the operating income, the fixed cost is subtracted from the contribution margin. It is important for the organization to figure out the percent of revenue. Revenue is 100%, Variable costs are 70% of the total revenue, and 30% makes up the contribution margin of the revenue. The break-even information is useful so organizations can see what the break-even amount is until the organization can start making a profit.
Baker, J. J., & Baker, R.W. (2014). Healthcare Finance (Fourth ed.). Burlington,
MA: Jones & Bartlett Learning
Breakeven Analysis. (2016). Retrieved from Small Business Administration
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