- In terms of total revenue, the break-even point of Olympia Hospital is equal to $60 millions.
- The average daily revenue per patient-day that is necessary to achieve the break-even total revenue is $1,600.
<h3>What is the break-even analysis?</h3>
Break-even analysis is also referred to as cost-volume-profit analysis and it can be defined as a financial accounting technique that is used to determine the number of units (products) which a business firm must sell at a specific price, either on a monthly or annual basis, so as to cover all of its costs.
<h3>How to calculate the break-even point?</h3>
In terms of total revenue, the break-even point of Olympia Hospital can be calculated by using this formula:
Break-even point = Fixed cost/CM ratio
Break-even point = $45 million/(100% - 25%)
Break-even point = $45 million/75%
Break-even point = $45 million/0.75
Break-even point = $60 millions.
<h3>How to calculate the average daily revenue?</h3>
Average daily revenue = Break-even point/Number of patient-days
Average daily revenue = $60 millions/37,500
Average daily revenue = $1,600.
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. When you multiply those together you'll get 312.