Southwest Hospital Has Fixed Costs of $100 Million Per Year

question 57

Essay

Southwest Hospital has fixed costs of $100 million per year.Variable costs represent approximately 80% of the total revenue.There are 50,000 patient-days estimated for next year.
Required:
A)What is the break-even point expressed in total revenue?
B)What is the average daily revenue per patient necessary to break even?

• A)What is the break-even point expressed in total revenue?
• B)What is the average daily revenue per patient necessary to break even?

---

Definitions:

Period Cost

Expenses that are not directly tied to the production process and are expensed in the period they are incurred, such as selling and administrative expenses.

Frosting

A sweet, often creamy glaze made of sugar with liquid (such as water or milk) and sometimes flavored, used to coat or decorate baked goods.

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the manufacturing of a product.

Conversion Costs

Expenses incurred during the transformation of raw materials into finished goods, typically including direct labor and manufacturing overhead costs.