Question

OPERATING AND NON-OPERATING COSTS AND REVENUES FOR TRAUMA CENTER

This document rearranges our variable and fixed cost information into the Operating and Non-Operating Costs that would appear on an Income Statement, so that a contribution margin and profit margin can be calculated. [Notice that Revenues are now shown in a right-hand column and costs are shown in a left-hand column.]

Operating Costs relate directly to patient care. Our previous labor costs, equipment costs, and a portion of the building cost are directly related to patient care and reported as Operating Costs. The remainder of the building and administrative costs are reported as Non-Operating costs. Health care facility Income Statements may report Non-Operating Revenue separately as well, since an accurate calculation of contribution margin requires that patient fees alone be set against the operating costs incurred to treat patients.

Operating Revenues:

Surgeries (patient fees)                                                                       $8,456,210

Operating Cost:

Labor Cost:                                                           $3,774,852                                  

Other Variable Cost:                                            $   487,078

Depreciation:

            Building:                                                   $9,97,292

            OR Equipment:                                        $   474,901

            Ambulance (Basic and Advanced)         $   110,810             

Interest:

            Building:                                                   $   153,429

            OR Equipment:                                        $     73,062              

            Ambulance (Basic and Advanced)         $      17,048

                                                                              $6,088,471              _______________          

NET OPERATING REVENUE                                                                $2,367,739

Non-Operating Revenue

Grants and Donations                                                                          $2114053

Non-Operating Cost:

Other Fixed Cost:                                                 $1,923,788             

Depreciation: Building                                        $   887,902

Interest: Building                                                $   147,984             

                                                                              $2,959,674              _______________

NET EARNINGS BEFORE TAX                                                             $1,522,118

                                                                             

Tax                                                                        $   243,539             

NET EARNINGS AFTER TAX                                                                $1,278,579

Question 1: Finding the Contribution Margin for the Trauma Center

Step One: The contribution margin is the proportion of Operating Revenues that remain after Operating Costs are paid. Divide the Net Operating Revenue by the Operating Revenue and express the quotient as a decimal (to the second decimal place or as a percentage.

What is the Contribution Margin?

Question 2: Finding the Profit Margin for the Trauma Center

Step One: The profit margin is the proportion of Total Revenues (Operating plus Non-Operating Revenues) that remain after all costs have been paid, including taxes. Divide the Net Earnings After Tax by the Total Revenue (sum of operating and non-operating revenues) and express the quotient as a decimal (to the third decimal place) or as a percentage (to the first decimal place).

What is the Profit Margin?

Question 3: Setting fees per overnight stay by their target contribution margin

(Do not use the Cost & Benefit numbers to answer this problem. Only use the numbers given in the question below.)

Let us suppose that a hospital wants to set their fees for an overnight stay such that the contribution margin on a hospital room will be 32%. The cost to the hospital of an overnight stay (staff, physical equipment, and supplies) is $410. What fee should they charge to obtain a contribution margin of 32%? [Hint: if the contribution margin is 32%, then the $410 cost is 68% of Operating Revenues.]

What is the target fee for an overnight stay? In other words, what must the Operating Revenues from that one room be?

Answer 1

solve The given that ④ contribution margin = net operating margin/ operating revenue - 2,36,7,739/8,456210 = 0.280 x 100 I contribution margin = 28%. ① Protit margin = net earning after tax / total revenue 1, 1978,579 / 8450200 + 2114053 a 1,978,579/10,570, 363 - 0.1209 xlooy. Profit margin = 12.097. ③ fees to be charged sales - 410/0.68 $602.94 cost (686) 410 contribution margin 321. canned with amScanner