# Break-Even and Contribution Margin

Anonymous

Question description

using this information, answer the following questionLP5.2

Revenues: Charge Patients (6,000 Patient Days) 750,000

Fixed-Price Patients (20,000 Patient Days) 1,800,000

Total Net Revenues 2,550,000

Cost:

Fixed Costs 1,170,000 Variable Costs (\$45/PD) 1,170,000

Total (\$90/PD) Net Income 2,340,000

Net income 210,000

1. What is the breakeven point in patient days for this nursing home, assuming no profit is required? .

First you must determine the “price per patient days,” which is also called “price per case

The average net revenue = \$Total Net Revenues / # of patient days = price per patient days

Using the price per patient days you can now proceed to the standard breakeven equation.

Break even volume in units = Fixed cost / (Price per patient day– Variable Cost) = # of patient days

2. If volume goes up 10 percent to 28,600 patient days and payer mix is unchanged, what will the net income be?

With this method simply start with the current net income and add to it the incremental income generated by the new patients. Of course, fixed costs will not change with the new patients. So, how much is earned on each marginal patient? That is just the contribution margin (CM) per patient day.

Average net revenue per patient day = (see calculation in previous problem)

Variable cost per patient day = ? (look closely at the provided information above for the variable cost, variable cost per patient day (PD) is given)

Contribution margin per patient day = ? (Price per patient day– Variable Cost)

Total contribution margin = Change in units × CM = ? (The change in units refers to the change in patient days from problem 1 and 2 above)

New net income = Original net income + total CM New net income = ?

(Top Tutor) Studypool Tutor
School: University of Maryland
Studypool has helped 1,244,100 students
flag Report DMCA

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors