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Break Even Analysis and calclating targeted profit amount

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Murillo Medical Institute operates a 100-bed hospital and offers a number of specialized medical services. Murillo's hospital facility and equipment are leased on a long term basis. The hospital chsrges $100 per patient day. On the basis of past cost data, Murillo has estimated its variable costs as $45.70 per patient day. Fixed costs are $91,000 per month. The hospital's administrator has estimated that the hospital will average 2,300 patients days per month.

a. How much will the hospital need to charge per patient day to break even at this level of activity?

b. Refer to the original data in the problem. How many patient days must Murillo average each month to earn a target profit of $45,000 per month?

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Solution Summary

Solution describes the steps in finding breakeven point and targeted profit for Murillo Medical Institute.

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Solution:

a. How much will the hospital need to charge per patient day to break even at this level of activity?

For break even to achieve total Revenue should be equal to total costs
Let hospital charges p amount per patient to achieve break even.
Estimated number of patients = ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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