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$1.00 Case study on CVP (Accounting)
- From Business: Accounting
- Closed, but you can still post tutorials
- Due on Jun. 09, 2009
- Asked on Jun 05, 2009 at 1:43:37PM
Q:Melford Hospital operates a general hospital, but rents space and beds to separately owned entities rendering specialised services such as pediatrics and psychaitric care. Melford chrges each separate entity for common services such as patients meals and laundry , and for administrative services such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity.
Melford charged the following costs to pediatrics for the year ended June 30,2006:
Patient Days Bed Capacity
(variable) (fixed)
Dietary $600,000 -
Janitorial - $70,000
Laundry $300,000 -
Laboratory $450,000 -
Pharmacy $350,000 -
Repairs and maintenance - $30,000
General and administrative - $1,300,000
Rent - $1,500,000
Billings and collections $300,000 -----------
Total $2,000,000 $2,900,000
During the year ended June 30,2006,pediatrics charged each patient an average of $300 per day,had a capacity of 60 beds, and had revenue of $6,000,000 for 365 days. In addition,pediatrics directly employed the following personnel:
Annual Salaries
Supervising nurses $25,000
Nurses $20,000
Aides $9,000
Melford has the following minimum departmental personnel requirements based on total annual patient days:
Annual patient days Aides Nurses Suprvising Nurses
Up to 21,900 20 10 4
21,900 to 26,000 26 13 4
26,001 to 29,200 30 15 4
These staffing levels represent ful-time equivalents.Pediatrics always employes only the minimum number of reqired full-time personnel. Salaries of supervising nurses, nurses and aides are therefore fixed within ranges of annual patient days.
Pediatrics operated at 100% capacity on 90 days during the year ended June 30,2006. It is estimated that during these 90 days the demand exceeded 20 patients more than capacity. Melford has an additional 20 beds available rent for the year ending June 30,2007. Such additional rental would increase pediatrics fixed charges based on bed capacity.
Required:
1.what is the strategic role of CVP analysis for the pediatrics unit of Melford hospital?
2.Determine the minimum number of patient days required for pediatrics to breakeven for the year ending June 30, 2007,if the additional 20 beds are not rented. Patient demands unknown, but assume that revenue per patient day, cost per patient day, cost per bed, and salary rates will remain the same as for the year ended June 30,2006.
3.Assume that patient demand,revenue ,revenue per patient day,cost per patient day, cost per bed and salary rates for the year ending June 30,2007 remain the same as for the year ended June 2006. Prepare a schedule of increase in revenue and increase in costs for the year ending June 30,2007,in order to determine the net increase or decrease in earnings from the additional 20 beds if pediatrics rents this extra capacity from Melford.
