7. Your firm, General Hospital is a not-for-profit, acute care facility which ha
ID: 2641050 • Letter: 7
Question
7. Your firm, General Hospital is a not-for-profit, acute care facility which has the following cost structure for its inpatient services. Your job is to determine based on your extensive knowledge of Cost behavior and profit analysis theory and concepts what solutions you would recommend to the Hospital CEO based on the following:
Fixed costs $10,000,000
Variable cost per inpatient day $200
Charge (revenue) per inpatient day $1,000
**Furthermore, assume that the Department expects a patient load of 15,000 inpatient days in coming year.
a. Construct the Hospital
Explanation / Answer
a) Income statement:
b) Contribution margin = Contribution / Sales
= 12000000 / 15000000
= 80%
BEP = Fixed cost /Contribution margin
= 10000000 / .80
= 12,500,000
c) Required volume = (FC + Profit) / Contribution per day
Contribution per day = 12000000 / 15000 = 800 per day
Required volume for 1000000 profit = (10000000 + 1000000) / 800 = 13750 patient days
Required volume for 500000 profit = (10000000 + 500000) / 800 = 13125 patient days
Revenue 150,00,000 Variable cost (30,00,000) Contribution 120,00,000 Fixed cost (100,00,000) Net income 20,00,000Related Questions
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