St. Mark\'s Hospital contains 450 beds. The average occupancy rate is 80% per mo

Question

St. Mark's Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are $32 per occupied bed per day, assuming a 30-day month. This $32 figure contains both variable and fixed cost elements.

During June, the hospital's occupancy rate was only 60%. A total of $326,700 in operating cost was incurred during the month.

Requirement 1:
(a)

Estimate the variable cost per occupied bed on a daily basis using the high-low method.

Explanation / Answer

Please Rate

High Activity 360 345600 Low Activity 270 326700 90 18900 Variable Cost Change in cost / Change in Activity 18900 /90 210

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