please help Shady Rest Nursing Home has 100 private pay residents. The administr
ID: 2663141 • Letter: P
Question
please helpShady Rest Nursing Home has 100 private pay residents. The administrator is concerned about balancing the ratio its private pay to non-private pay patients. Non-private pay sources reimburse an average of $100 per day whereas private pay residents pay average 100 percent of full daily charges. The administrator estimates that variable cost per resident per day is $25 for supplies, food, and contracted services and annual fixed costs are $4,562,500.
What is the daily contribution margin of each non-private pay resident?
Explanation / Answer
Annual Fixed cost = 4562,500 Per day fixed cost = 4562,500/365 = $12,500 As there are 100 Pvt Pay residents, per Pvt Pay resident Fixed cost = 12500/100 = $125 Var cost per resident is $25. So Hospital is recvering $125+$25 = $150 per day from pvt pay residents as Full Daily charge Also Hospital is recovering $100 per day from Non-Pvt pay source. As Var cost per resident pr day is $25. Contribution margin for each Non-pay resident = Amt charged - Var cost = 100-25 = 75 So Daily COnt margin for non-pvt pay resident is $75
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