Formula to compute break even (units) = Fixed cost / ((Revenue/unit)-(Variable cost/unit))
= {($453,000+$468,000)**} / { ($65*60 beds) – ($262,800 (given in the question) /292 days****)
= $921,000 / $3000
= 307 days
To achieve break even no of days should be 307 days approx..
** Computation of Fixed cost:
Add following fixed cost to get total fixed cost:
*** Computation of Fixed cost of Nurses, Aides & Supervising Nurses is as follows:
To proceed further we will have to compute Patient days or Bed days. So Patient days or Bed days = $1,138,800/ $65 = 17,520
Now look at the table of Annual Patient Days and see at which range/category does 17,520 comes. It comes under third (from top) category. For this category details are as follows:
No of Nurses = 13
No of aides = 22
No of supervising Nurses = 4
So now we will multiply above numbers by the rates to arrive at the fixed cost of nurses, aides and supervising nurses, as follows:
Fixed cost of Nurses = 13 x $16,000 = $208,000
Fixed cost of Supervising Nurses = 4 x $21,000 = $84,000
Fixed cost of aides = 22 x $8000 = $ 176,000
Computation of Fixed cost of Nurses, Aides & Supervising Nurses is the sum of above listed balances i.e = $208,000+$84,000+$176,000 = $468,000
**** Computation of 292 days = $1,138,800 / ($65 x 60) = 292 days - This represents the no of days for which beds were used
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