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    Fixed Cost Analysis

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    Company, a not-for-profit acute care facility has this cost structure for its inpatient services:

    Fixed costs $10,000,000
    Variable cost per inpatient day $200
    Charge (revenue) per inpatient day $1,000

    The hospital expects to have a patient load of 15,000 inpatient days next year.

    1. Construct hospitalâ??s base case projected P&L statement

    2. Hospitalâ??s break-even point

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

    4. Assume that 20 percent of the hospitalâ??s inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?

    Managers of a hospital are setting the price on a new outpatient service. Data listed:

    Variable cost per visit $5.00
    Annual direct fixed costs $500,000
    Annual overhead allocation $50,000
    Expected annual utilization 10,000 visits

    1. What per visit must be set for the service to break even? To earn annual profit of $100,000.

    2. Repeat Part 1, assume variable cost per visit is $10

    3. Return to the data given in problem. Again repeat Part 1, but assume direct costs are $1,000,000

    4. Repeat Part 1 assuming both a $10 variable cost and $1,000,000 in direct fixed costs

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    Solution Summary

    The solution performs a Fixed Cost Analysis for a not-for-profit acute care facility and computes projected P&L statement
    , breakeven point, required profit, agreeing on discount proposal decision.