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Olympia Hospital has overall variable costs of 25% of total revenue and fixed 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.

Respuesta :

Lanuel
  1. In terms of total revenue, the break-even point of Olympia Hospital is equal to $60 millions.
  2. The average daily revenue per patient-day that is necessary to achieve the break-even total revenue is $1,600.

What is the break-even analysis?

Break-even analysis is also referred to as cost-volume-profit analysis and it can be defined as a financial accounting technique that is used to determine the number of units (products) which a business firm must sell at a specific price, either on a monthly or annual basis, so as to cover all of its costs.

How to calculate the break-even point?

In terms of total revenue, the break-even point of Olympia Hospital can be calculated by using this formula:

Break-even point = Fixed cost/CM ratio

Break-even point = $45 million/(100% - 25%)

Break-even point = $45 million/75%

Break-even point = $45 million/0.75

Break-even point = $60 millions.

How to calculate the average daily revenue?

Average daily revenue = Break-even point/Number of patient-days

Average daily revenue = $60 millions/37,500

Average daily revenue = $1,600.

Read more on break-even analysis here: https://brainly.com/question/20973795

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