Question

A hospital reports the following cost and revenue data: Variable cost per inpatient day of $250 Revenue per inpatient day of $1000 Fixed costs of $15 million What is the expected profit at a volume of 25,000 inpatient days?

Answer 1

Answer:

Expected profit at a volume of 25,000 inpatient days = $3,750,000.00

Explanation:

The expected profit is calculated as follows:

Step 1

Total contribution per inpatient from 25,000 inpatients

contribution = (revenue - variable cost) per patient

= $(1000-250)

= $750 per inpatient day

Total contribution for 25,000 inpatient days

$750 × 25000 =  $18,750,000.00

Step 2

Calculate Profit

Profit = Total contribution - Fixed cost

         =$18,750,000.00 -$15,000,000

        =  $3,750,000.00

Expected profit at a volume of 25,000 inpatient days = $3,750,000.00