Scenario: Murillo Medical Institute operates a 100-bed hospital and offers a number of specialized medical services. Murillo's hospital facility and equipment are leased on a long-term basis. The hospital charges $100 per patient day. On the basis of past cost data Murillo has estimated its variable costs as $45.70 per patient day. Fixed costs are $91,000 per month. The hospital's administrator has estimated that the hospital will average 2,300 patient days per month.
Questions:
Q1. How much will the hospital need to charge per patient day to break even at this level of activity?
Q2. Refer to the original date in the problem. How many patient days must Murillo average each month to earn a target profit or $45,000 per month?