Understanding an Income Statement

You are an intern in a health care organization business office. Use the Dehew Health System income statement in the attachment, please develop a 4-6 page paper responding to the following questions regarding the income statement:

  1. What is an income statement used for?
  2. What are the key components of an income statement?
  3. On your example of an income statement, is the organization making a profit or loss? How much is that profit or loss? Show the calculations. (Total Revenues – Total Expenses = Net Profit/Loss)
  4. On your example of an income statement, what is the “total contribution margin”? Show the calculations. (Net Sales – Total Variable Costs=Total Contribution Margin). Also calculate the contribution per unit of service (UOS). If you are not using the sample financial statement you can use the assumption that volume is 15,000 UOS if not included in financial statements.
  5. What three financial indicators does a contribution margin help determine? How?
  6. What is a break-even analysis? What is the break-even point for this organization? List expenses assigned as variable and fixed. Show the calculations. (Net Operating Revenue – Variable Costs = Contribution Margin. Contribution margin/UOS = CM per UOS. Fixed Costs/CM per UOS = # of UOS to Breakeven).
  7. How does a break-even analysis vary between fee-for-service and capitated payments? Explain it using the income statement you chose. What are the similarities and differences applicable to the Income statements in fee-for-service and capitated payment options?

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