d. None or the above Calculation: General Hospital has only two types of patient

Question

d. None or the above Calculation: General Hospital has only two types of patients, DRG 1 and DRG 2. Below are data on these two DRGs: 5. DRG 1 patients generate total average payment per case of $10,000 and cause the hospital to incur $7,000 of variable costs for each case. Direct fixed costs related to this DRG are $150,000. DRG 2 patients generate average payments per case of $3,000 each, and cause the hospital to incur variable costs of $1,000 for each case. Direct fixed costs related to this DRG are $100,000. Indirect overhead cost for both DRGs combined is $350,000, which is allocated to each DRG based on revenue. Assuming both DRGs have similar volume, what is the total number of cases for both DRGs combined needed to break even?" (show your work, put your answer in the space provided). 12 points

Explanation / Answer

DRG1 DRG2 Number of Cases X X Revenue per Case         10,000.00                       3,000.00 Variable Cost per Case           7,000.00                       1,000.00 Fixed Cost       150,000.00                   100,000.00 Combined Fixed Costs 350000 So Break Even calculations (10000-7000)X+(3000-1000)X = 150000+100000+350000 (10000-7000)X+(3000-1000)X = 600000 X = 120.0

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