What is the daily contribution margin of non-private pay


Question:

1. Shady Rest Nursing Home has 100 private pay residents. The administrator is concerned about balancing the ratio its private pay to non-private pay patients. Non-private pay sources reimburse an average of $100 per day whereas private pay residents pay average 100 percent of full daily charges. The administrator estimates that variable cost per resident per day is $25 for supplies, food, and contracted services and annual fixed costs are $4,562,500.

• What is the daily contribution margin of each non-private pay resident?

• If 25 percent of the residents are non-private pay, what will shady Rest charge the private pay patients in order to break even?

• What if non-private pay payors cover 50 percent of the residents?

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Accounting Basics: What is the daily contribution margin of non-private pay
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