Case Study of a health care organization's profitability
In this assessment you will use the data provided below and conduct a profit (CVP) analysis. You will be graded based on your understanding of profit (CVP) analysis, the accuracy of your calculations, the validity of you conclusions and your ability to clearly communicate your analysis. Please show all formulas used and full calculations in order to receive full credit. The Week 3 summary will provide you with guidance on this assignment. To complete this assignment, follow these steps.
Assume the following information about cost and charges for a hospital in 2014:
For the initial profit/loss calculation assume the volume of 15,000 inpatient days
Fixed Costs = $10,000,000
Variable cost per inpatient Day = $200
Revenue Per Inpatient Day = $1,000.
Review Week 3 readings and PowerPoint summary on Cost Volume Profit Analysis. From what you have learned in these resources do the following:
- Calculate the hospital's profit and loss statement (assuming volume of 15,000 inpatient days)
- Define and calculate the hospital's break even point?
- Define the contribution margin? What is it's economic meaning?
- What volume is required to provide a profit of $1 million?
- What volume is required to provide a profit of $500,000?
- Explain in general how breakeven points vary in a capitated vs. non-capitated environment.
Your calculations should be submitted in Excel. Again, I need to see all formulas and calculations used to get to the final answer, Include headings for each section.
Be sure to include a cover page with your name, class/section and instructor's name.