St Mark's Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are £32 per occupied bed per day, assuming a 30-day month. This £32 figure contains both variable and fixed cost elements. During June, the hospital's occupancy rate was only 60%. A total of £326,700 in operating cast was incurred during the month. Required: 1. Using the high-low method, estimate: a. The variable cost per occupied bed on a daily basis b. The total fixed cost operating cost per month. 2. Assuming an occupancy rate of 70% per month. What amount of total operating cost would you expect the hospital to incur?
St Mark's Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words, on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are £32 per occupied bed per day, assuming a 30-day month. This £32 figure contains both variable and fixed cost elements. During June, the hospital's occupancy rate was only 60%. A total of £326,700 in operating cast was incurred during the month. Required: 1. Using the high-low method, estimate: a. The variable cost per occupied bed on a daily basis b. The total fixed cost operating cost per month. 2. Assuming an occupancy rate of 70% per month. What amount of total operating cost would you expect the hospital to incur?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise (From 3-5 Seal et al 5th Ed, page 89-90)
St Mark's Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words,
on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the
hospital's operating costs are £32 per occupied bed per day, assuming a 30-day month. This £32
figure contains both variable and fixed cost elements.
During June, the hospital's occupancy rate was only 60%. A total of £326,700 in operating cast was
incurred during the month.
Required:
1.
Using the high-low method, estimate:
a. The variable cost per occupied bed on a daily basis
b. The total fixed cost operating cost per month.
2. Assuming an occupancy rate of 70% per month. What amount of total operating cost would you
expect the hospital to incur?
3. Information about and use of (i) Direct/Indirect costs, (ii) Fixed and Variable costs are important for
managing via accounting. Briefly write down and describe the 2 concepts pairs above and how they
can be useful in managing the hospital (300-500 words).
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