Thunder Manor, a not-for-profit acute care facility, has the following cost stru

Question

Thunder Manor, a not-for-profit acute care facility, has the following cost structure for its inpatient services for 2014:                                                                          

            Fixed costs                                                 $13,000,000                                                   

            Variable cost per inpatient day                       $200                                                   

            Charge (revenue) per inpatient day                 $1,400                                                            

The hospital expects to have a patient load of 19,000 in patient days next year                  

a.         Construct the hospital's base case project profit and loss statement.                                    

b.         What is the hospital's breakeven point?                                                                     

c.         What volume is required to provide a profit of $1,000,000? A profit of $500,000?

Explanation / Answer

a.

2. hospital's breakeven point= 13000,000/(1400-200)= 10833 patients

3. What volume is required to provide a profit of $1,000,000?

Volume*(1400-200)-13000,000 = 1,000,000

Volume = 11667

A profit of $500,000?

Volume*(1400-200)-13000,000 = 500,000

Volume = 11250

Income Statement Revenue 26600000 Variable Cost 3800000 Gross Profit 22800000 Fixed Costs 13000000 Net income 9800000

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