Olympia Hospital has overall variable costs of 25% of total revenue and fi xed costs of $45 million
per year.
1. Compute the break-even point expressed in total revenue.
2. A patient-day is often used to measure the volume of a hospital. Suppose there are to be 37,500
patient-days next year. Compute the average daily revenue per patient-day necessary to achieve
the break-even total revenue computed in item 1.

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anthougo anthougo · Answer 1 · 2022-08-24T22:27:58+02:00

1. The break-even point in total revenue that Olympia Hospital requires is $60 million.

2. The average revenue per patient-day to achieve the above break-even total revenue is $1,600.

The break-even point is the point when the total sales are equal to the total costs.

At the break-even point, Olympia Hospital does not incur any loss or earn any profit.

The formula for computing the break-even total revenue is the fixed costs divided by contribution margin ratio.

Variable costs = 25% of total revenue

Fixed costs = $45 million

Total patient-days next year = 37,500 patient-days

Contribution margin ratio = 75% (100% - 25%)

Break-even point in total revenue = $60 million ($45 million/75%)

The average revenue per patient-day to achieve break-even total revenue = $1,600 ($60 million/37,500)

Thus, Olympia Hospital needs to achieve a break-even total revenue of $60 million and $1,600 per patient-day next year to break-even.

Learn more about the break-even point at https://brainly.com/question/21137380

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