Problem:
Company, a not-for-profit acute care facility has this cost structure for its inpatient services:
Fixed costs $10,000,000
Variable cost per inpatient day $200
Charge (revenue) per inpatient day $1,000
The hospital expects to have a patient load of 15,000 inpatient days next year.
1. Construct hospital's base case projected P&L statement
2. Hospital's break-even point
3. What volume is required to provide a profit of $1,000,000. A profit of $500,000?
4. Assume that 20 percent of the hospital's inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?
Managers of a hospital are setting the price on a new outpatient service. Data listed:
Variable cost per visit $5.00
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected annual utilization 10,000 visits
1. What per visit must be set for the service to break even? To earn annual profit of $100,000.
2. Repeat Part 1, assume variable cost per visit is $10
3. Return to the data given in problem. Again repeat Part 1, but assume direct costs are $1,000,000
4. Repeat Part 1 assuming both a $10 variable cost and $1,000,000 in direct fixed costs