Question: Let us suppose that a hospital wants to set their fees for an overnight stay such that the contribution margin on a hospital room will be 35%. The cost to the hospital of an overnight stay (staff, physical equipment, and supplies) is $400. What fee should they charge to obtain a contribution margin of 35%? [Hint: if the contribution margin is 35%, then the $400 cost is 65% of Operating Revenues.]
What is the target fee for an overnight stay?