General Hospital, a not-for-profit acute care facility, has the following cost s
ID: 2722158 • Letter: G
Question
General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:
The hospital expects to have a patient load of 1505 inpatient days next year. Assume that 20 percent of the hospital's inpatient days come from a managed care plan that wants a 24 percent discount from charges. What is the change in profit if the hospital accepts the proposal?
The answer is -6502. Please help me understand how to calculate and get the correct answer.
Fixed Costs $946,189 Variable Cost per inpatient day $17 Charge (revenue) per inpatient day $90Explanation / Answer
The load expecting discount = 1505* .20 = 301 impatient days
If discount is nt offered ,Contribution = 301 (90 -17)
= 301 * 73
= $ 21973
If discount is offered ,Discounted price = 90 (1-.24 ) = 90*.76 = 68.4
Contribution = 301 (68.4-17)
= 301 * 51.4
= $ 15471
Change in profit = 15471-21973 = $ - 6502
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