Q1. A hospital in Dammam defines its output or volume as a patient day. Assume t

Question

Q1. A hospital in Dammam defines its output or volume as a patient day. Assume the hospital has the following financial information: Price per patient = SR 9,500 Cost per patient day = SR 5,000 Fixed cost per period = SR 530,000

a) What is the breakeven in patient days for the hospital? (assume no profit is required)

b) What is the contribution margin?

c) What is the total contribution margin?

d) Assuming a profit of SR 30,000 is required by the hospital, what would be the new break-even in patient days?

Explanation / Answer

Price Per patient SR 9500 Cost Per Patient Sr 5000 Contribution Per Patient Sr 4500 Fixed Cost Sr 530000 1 Breakeven point=0 Price*Volume-Variable cost*Volume-Fixed cost 9500Volume-5000Volume-530000=0 4500volume-530000=0 Volume= 118 2 Contribution Margin SR 4500 3 Total Contribution Margin (Fixed Cost +Profit) Assume Profit= 0 530000+0 530000 Total Contribution Margin SR 530000 4 P/v Ratio= 47.3684 (fixed cost+Profit)/contribution per unit 124

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