1 answer

The Pediatric Department at Wymont General Hospital has a capacity of 90 beds and operates 24hours...

Question:

The Pediatric Department at Wymont General Hospital has a capacity of 90 beds and operates 24hours a day every day. The measu

The Pediatric Department at Wymont General Hospital has a capacity of 90 beds and operates 24hours a day every day. The measure of activity in the department is patient-days, where one patient-day represents one patient occupying a bed for one day. The average revenue per patient- day is $400 and the average variable cost per patient-day is $240. The fixed cost of the department (not including personnel costs) is $1,000,000. The only personnel directly employed by the Pediatric Department are aides, nurses, and supervising nurses. The hospital has minimum staffing requirements for the department based on total annual patient-days in Pediatrics. Hospital requirements, beginning at the minimum expected level of activity, follow: Nurses Aides 21 Supervising Nurses Annual Patient-Days 10,000-14,000 14,001--17,000 17,001-23,725 23,726-25,550 25,551-27,375 27,376-29,200 + tono These staffing levels represent full-time equivalents, and it should be assumed that the Pediatric Department always employs only the minimum number of required full-time equivalent personnel. Average annual salaries for each class of employee are: aides, $45,000; nurses, $60,000; and supervising nurses, $84,000. Required: 1. Compute the total fixed costs (including the salaries of aides, nurses, and supervising nurses) in the Pediatric Department for each level of activity shown above (i.e., total fixed costs at the 10,000–14,000 patient-day level of activity, total fixed costs at the 14,001-17,000 patient-day level of activity, etc.). 2. Compute the minimum number of patient-days required for the Pediatric Department to breakeven. (Hint: Divided total fixed costs in each level by unit contribution margin to see if the required B.E unit sales is in that patient-days range)

Answers

Fixed costs are no matter those costs which remain same irrespective of the change in volume of patients. Breakeven point is the point where there is no profit or no loss. Fixed cost here is sum of salaries of aides, salaries of nurses and supervising nurses salaries.

Headings >>>>1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Computation >>>

2*3

5*6

8*9

4+7+10

11+12

13/14

Annual Patient Day

Aides

Per Aide Cost

Total Aides Cost

Nurses

Per Nurse Cost

Total Nurses
Cost

Supervising
Nurses

Per Surpervisor
Cost

Total Supervising
Nurses Cost

Total Staffing
Cost

Other Fixe
Cost

Total
Fixed Costs

Contribution per
patient day

Breakeven
Patient Days

10000 - 14000

21

45,000

945,000

11

60,000

660,000

4

84,000

336,000

1,941,000

10,00,000

2,941,000

160

18,381.25

14001 - 17000

22

45,000

990,000

12

60,000

720,000

4

84,000

336,000

2,046,000

10,00,000

3,046,000

160

19,037.50

17001 - 23725

22

45,000

990,000

13

60,000

780,000

4

84,000

336,000

2,106,000

10,00,000

3,106,000

160

19,412.50

23726 - 25550

25

45,000

1,125,000

14

60,000

840,000

5

84,000

420,000

2,385,000

10,00,000

3,385,000

160

21,156.25

25551 - 27375

26

45,000

1,170,000

14

60,000

840,000

5

84,000

420,000

2,430,000

10,00,000

3,430,000

160

21,437.50

27376 - 29200

29

45,000

1,305,000

16

60,000

960,000

6

84,000

504,000

2,769,000

10,00,000

3,769,000

160

23,556.25

Average Revenue per patient day = 400

Average Variable cost per patient day = 240

Contribution per patient day = 400-240 =160

As total breakeven patient days 19412.50 falls between range of 17001 to 23725, this is the point, where there is actual breakeven.

Hence. between 17000 to 23725 Patient Days is breakeven point.

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