st martin hospital has overall variable cost of 20% of total revenue and fixed c

Question

st martin hospital has overall variable cost of 20% of total revenue and fixed costs of $40 million per year.

Requirements:

1.compute the break even point expressed in total revenue.

2.a patient-day is often used to measure the volume of a hospital. suppose there are to be 40,000 patient days next year. compute the average daily revenue per patient day neccessary to break even.

req-1

______ / ________ = Break even point in revenue

______/_________= __________

req-2

______/______= daily revenue per patient

______/______=_________

Explanation / Answer

Hi,

Please find the answer as follows:

Part A = Fixed Cost/Contribution Ratio = 40000000/(1-.20) = 50000000 or 50 million

Part B = 50000000/40000 =1250

Thanks.

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