Question

ABC Medical Center, has estimated the following costs for its inpatient services: Fixed costs $15,000,000; Variable cost per inpatient day $150

The hospital expects to have 10,000 inpatient days next year. What is the hospital’s underlying cost structure? What are the hospitals expected total costs? What are the hospital’s estimated total costs at 12,500 inpatient days? At 17,500 inpatient days? What is the average cost per inpatient day at 12,500; 15,000, and 17,500 inpatient days?

Answer 1

ABC Medical Center, has estimated the following costs for its inpatient services

Fixed costs = $15,000,000

Variable cost per inpatient day = @ $150

hospitals underlying cost structure is based on only fixed cost and variable cost

hospitals expected total costs = $15,000,000 + 10,000$ * $150 = $ 16,500,000 (i.e given  hospital expects to have 10,000 inpatient days next year.)

PARTICULARS	12,500	15000	17500
FIXED COST	$15,000,000	$15,000,000	$15,000,000
VARIABLE COST	12,500*$150=$1,875,000	15000*$150=$2,250,000	17500*$150=$2,625,000
TOTAL COST (FIXED + VARIABLE)	$16,875,000	$17,250,000	$17,625,000
AVERAGE COST= TOTAL COST/INPATIENT DAYS of the year	16875000/12500=$1,350	17250000/15000=$1,150	17625000/17500=$1,007