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For a given healthcare product, the Magnolia Health Plan has a premium of $80 PMPM and a unit variable cost of $30 PMPM. Fixed costs for this product are $30,000 per month. Magnolia can correctly calculate the break-even point for this product to be:
Suggested Answer: C
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28 comments · newest first
CA
Carlee
11 months ago
Not sure about that calculation, feels a bit sketchy.
AS
Ashleigh
11 months ago
I agree, 375 sounds right based on the numbers.
MI
Miss
12 months ago
Wait, how did they get 274 members? That seems off.
RI
Rima
12 months ago
I think it's definitely 375 members!
BE
Beatriz
1 year ago
Break-even is calculated by fixed costs divided by (premium - variable cost).
KE
Kenia
1 year ago
I believe the answer is 375 members, but I’m not completely confident. I just hope I remember the calculations correctly from our last review session.
TH
Thurman
1 year ago
I’m a bit confused about the numbers. If I recall correctly, the fixed costs are $30,000, but I’m not sure how to apply that to find the break-even point.
PE
Pedro
1 year ago
I remember a practice question that was similar, and I think we had to subtract the variable cost from the premium first. That might help us find the right answer here.
CE
Celia
1 year ago
I think the break-even point is calculated by dividing fixed costs by the difference between premium and variable cost, but I’m not entirely sure about the formula.
AM
Amira
1 year ago
Alright, this is a classic break-even problem. I've got the premium, variable cost, and fixed costs, so I just need to plug those into the formula and solve for the break-even point. Should be a straightforward calculation.
TA
Tasia
1 year ago
I'm a little unsure about this one. Break-even analysis can be tricky, and I want to make sure I'm doing the calculations correctly. Let me walk through it step-by-step to make sure I don't miss anything.
QU
Quentin
1 year ago
Hmm, let me think this through. The premium is $80 PMPM and the variable cost is $30 PMPM, so the contribution margin is $50 PMPM. Then I need to divide the fixed costs of $30,000 by the contribution margin to get the break-even point. Okay, I think I've got this!
MA
Madonna
1 year ago
This looks like a straightforward break-even analysis problem. I'll start by calculating the contribution margin per member, then divide the fixed costs by that to get the break-even point.
AN
Annamae
2 years ago
Haha, I bet the exam writers are trying to catch us with some tricky math here. Good thing we're all sharp-minded healthcare professionals, am I right?
KE
Kendra
2 years ago
D) 1,000 members
GR
Graciela
2 years ago
C) 600 members
RO
Rosenda
2 years ago
B) 375 members
RI
Ria
2 years ago
A) 274 members
EM
Emily
2 years ago
Ah, I see what you mean, Carma. The break-even point is where total revenue equals total costs, so we need to set (PMPM revenue * members) = (PMPM variable cost * members) + fixed costs. Solving for members gives us the answer C. 600 members.
CA
Carma
2 years ago
Hmm, I'm not so sure. Shouldn't we be looking at the total revenue and total costs to find the break-even point? Let me double-check the calculations.
NO
Norah
2 years ago
I think the answer is B. 375 members. The fixed costs are $30,000 and the contribution margin per member is $50 ($80 PMPM - $30 PMPM), so the break-even point would be $30,000 / $50 = 375 members.
CA
Carol
2 years ago
That makes sense, the calculation checks out.
MI
Micaela
2 years ago
That makes sense, the contribution margin per member is $50.
SA
Sanda
2 years ago
I agree, the break-even point is indeed 375 members.
CE
Celia
2 years ago
I agree, the break-even point is 375 members.
SH
Sherill
2 years ago
But the fixed costs are $30,000, so I believe it's 274 members.
VI
Vicky
2 years ago
I disagree, I calculated it to be 375 members.
SH
Sherill
2 years ago
I think the break-even point is 274 members.