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# Susquehhana Medical Centre Case Solution

Solution Id Length Case Author Case Publisher
1498 535 Words (4 Pages)
This solution includes: A Word File and An Excel File

Renting the 20 additional beds and using it for 90 days in which the company operated at full capacity, will have an impact on sales, variable and fixed cost. The revenues will be increased by \$648,000 which is calculated by multiplying the additional beds 20 with 90 days and per day charge of \$360. The variable cost per day is \$120 as explained in question 1. The fixed charges by the medical center are \$1,160,000 which are adjusted for the newly rented beds. After increasing the bed capacity, the number of patient days will increase and the staff requirement will be now according to the second category in which the patient days are more than 22,000. The net decrease in earnings is \$133,927. Exhibit 2 shows the schedule for an increase in revenues and cost.

## Following questions are answered in this case study solution:

1. Calculate the minimum number of patient days required for pediatrics to break even for the year ending June 30,20x6, if the additional 20 beds are not rented. Patient demand is unknown, but assumes that revenue per patient day, cost per patient day, and cost per bed, and salary rates will remain the same as for the year ended June 30,20x5.

2. Assume that patient demand, revenue per patient day, cost per patient day, cost per bed, and salary rates for the year ending June 30,20x6, remains the same as for the year ended June 30,20x5. Prepare a schedule of Pediatrics increase in revenue and increase in cost for the year ending June 30,20x6. Determine the net increase or decrease I pediatrics earnings from the additional 20 beds if pediatrics rents this extra capacity from Susquehanna Medical Center.

## Case Study Questions Answers

#### Question 1

To calculate the minimum number of patient days, the total fixed cost of the medical center and the contribution margin per patient day was required. The Fixed cost is related to the bed capacity and include the cost related to Janitorial Staff, Repairs & Maintenance, General & Administration Expenses and rent of the building. The total fixed cost for the year ended June 30, 20x5 comes out to be \$3,840,000. The fixed cost also includes the cost of the Salaries of the staff. The minimum number of the salaried staff included four supervising nurses, ten nurses and twenty aids.

The variable cost per patient day is \$120. This cost is calculated using the total variable cost related to the patient days. Therefore, the total variable cost is divided to the total patient days which are 365 and must be adjusted for bed capacity of 60. This will give the variable cost per patient day. The revenue that is charged per patient day is \$360. To calculate the contribution margin, the variable cost per patient day is deducted from the revenue charged per patient day. As shown in Exhibit, the contribution margin comes out to be \$240. Lastly, the breakeven point is calculated by dividing the fixed cost with the contribution margin. From Exhibit 1, it is clear that the breakeven point is 16045 patient days.

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