Your nursing home defines output as a patient day. Its present volume is 26,000
ID: 2388328 • Letter: Y
Question
Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. Present revenues and costs are presented below:Revenues
Charge Patients (6,000 Patient Days) $750,000
Fixed-Price Patients (20,000 Patient Days) $1,800,000
Total Net Revenues $2,550,000
Costs
Fixed Costs $1,170,000
Variable Costs ($45/PD) $1,170,000
Total ($90/PD) $2,340,000
Net Income $210,000
Using this information, answer the following two questions:
1.What is the break-even in patient days for this nursing home, assuming no profit is required?
2. If volume goes up 10% to 28,600 patient days and payer mix is unchanged, what will net income be?
Explanation / Answer
a.Per Day 6000 Per Day 20000 Revenue 125 750000 90 1800000 Variable Cost 45 270000 45 900000 Contribution 80 480000 45 900000 Fixed Cost 45 270000 45 900000 Net income 35 210000
0
Break Even Day's = Fixed Cost / Contribution per day
= 270000/80
Charge patients = 3375 days
= 900000 / 45
Fixed price patients = 20000 days
Total Break Even Days = 3375 + 20000
= 23375 Days
Per Day 6000 Per Day 20000 Revenue 125 750000 90 1800000 Variable Cost 45 270000 45 900000 Contribution 80 480000 45 900000 Fixed Cost 45 270000 45 900000 Net income 35 210000 0 Break Even Day's = Fixed Cost / Contribution per day = 270000/80 Charge patients = 3375 days = 900000 / 45 Fixed price patients = 20000 days Total Break Even Days = 3375 + 20000 = 23375 Days
b.
Per Day 6600 Per Day 22000 Revenue 125 825000 90 1980000 Variable Cost 45 297000 45 990000 Contribution 80 528000 45 990000 Fixed Cost 41 270000 41 900000 Net income 39.1 258000 4.1 90000 Total Net Income = 258000 + 90000
= $348,000
Per Day 6600 Per Day 22000 Revenue 125 825000 90 1980000 Variable Cost 45 297000 45 990000 Contribution 80 528000 45 990000 Fixed Cost 41 270000 41 900000 Net income 39.1 258000 4.1 90000 Total Net Income = 258000 + 90000 = $348,000
Per Day 6000 Per Day 20000 Revenue 125 750000 90 1800000 Variable Cost 45 270000 45 900000 Contribution 80 480000 45 900000 Fixed Cost 45 270000 45 900000 Net income 35 210000
0
Break Even Day's = Fixed Cost / Contribution per day
= 270000/80
Charge patients = 3375 days
= 900000 / 45
Fixed price patients = 20000 days
Total Break Even Days = 3375 + 20000
= 23375 Days
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