St. Teresa's Medical Center (STMC) offers a number of specialized medical services, including neuroscience, cardiology, and oncology. STMC's strong reputation for quality medical care allowed it to branch out into other services. It is now ready to expand its orthopedic services and has just added a free-standing orthopedic clinic offering a full range of outpatient, surgical, and physical therapy services. The cost of the orthopedic facility is depreciated on a straight-line basis. All equipment within the facility is leased. Since the clinic had no experience with in-patient orthopedic services (for patients recovering from hip and knee replacements, for example), it decided to operate the orthopedic center for two months before determining how much to charge per patient day on an ongoing basis. As a temporary measure, the clinic adopted a patient-day charge of $190, an amount equal to the fees charged by a hospital specializing in orthopedic care in a nearby city. This initial per-day charge was quoted to patients entering the orthopedic center during the first two months with assurances that if the actual operating costs of the new center justified it, the charge could be less. In no case would the charges be more. A temporary policy of billing after 60 days was adopted so that any adjustments could be made. The orthopedic center opened on January 1. During January, the center had 4,100 patient days of activity. During February, the activity was 4,400 patient days. Costs for these two levels of activity output are as follows:   4,100 Patient Days 4,400 Patient Days Salaries, nurses $ 58,400 $ 58,400 Aides   31,800   31,800 Pharmacy   228,500   243,800 Laboratory   127,700   135,500 Depreciation   27,800   27,800 Laundry   211,970   227,480 Administration   27,700   27,700 Lease (equipment)   33,800   33,800 Required: 1. Classify each cost as fixed, variable, or mixed, using patient days as the activity driver. Assume that the Pharmacy & Laboratory are “in house” and that the Laundry is “shipped out” to a third party vendor. Salaries, nurses   Aides   Pharmacy   Laboratory   Depreciation   Laundry   Administration   Lease (equipment)   2. Use the high-low method to separate the mixed costs into fixed and variable.   Laboratory: Pharmacy: Variable $fill in the blank 9 per patient day $fill in the blank 10 per patient day Fixed $fill in the blank 11 $fill in the blank 12 3. The administrator of the orthopedic center estimated that the center will average 4,300 patient days per month. If the center is to be operated as a nonprofit organization, determine the amount it will need to charge per patient day? Round your interim calculations and final answers to the nearest cent. $fill in the blank 13 Charge per patient day How much of this charge is variable? $fill in the blank 14 Variable charge per patient day How much of the charge per patient day is fixed? $fill in the blank 15 Fixed charge per patient day 4. Suppose the orthopedic center averages 4,600 patient days per month. How much would need to be charged per patient day for the center to cover its costs? Round your answer to the nearest cent. $fill in the blank 16 per patient day The main reason why the charge per patient day decreased as the activity output increased is because:

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  1. St. Teresa's Medical Center (STMC) offers a number of specialized medical services, including neuroscience, cardiology, and oncology. STMC's strong reputation for quality medical care allowed it to branch out into other services. It is now ready to expand its orthopedic services and has just added a free-standing orthopedic clinic offering a full range of outpatient, surgical, and physical therapy services. The cost of the orthopedic facility is depreciated on a straight-line basis. All equipment within the facility is leased.

    Since the clinic had no experience with in-patient orthopedic services (for patients recovering from hip and knee replacements, for example), it decided to operate the orthopedic center for two months before determining how much to charge per patient day on an ongoing basis. As a temporary measure, the clinic adopted a patient-day charge of $190, an amount equal to the fees charged by a hospital specializing in orthopedic care in a nearby city.

    This initial per-day charge was quoted to patients entering the orthopedic center during the first two months with assurances that if the actual operating costs of the new center justified it, the charge could be less. In no case would the charges be more. A temporary policy of billing after 60 days was adopted so that any adjustments could be made.

    The orthopedic center opened on January 1. During January, the center had 4,100 patient days of activity. During February, the activity was 4,400 patient days. Costs for these two levels of activity output are as follows:


      4,100 Patient Days 4,400 Patient Days
    Salaries, nurses $ 58,400 $ 58,400
    Aides   31,800   31,800
    Pharmacy   228,500   243,800
    Laboratory   127,700   135,500
    Depreciation   27,800   27,800
    Laundry   211,970   227,480
    Administration   27,700   27,700
    Lease (equipment)   33,800   33,800

    Required:

    1. Classify each cost as fixed, variable, or mixed, using patient days as the activity driver. Assume that the Pharmacy & Laboratory are “in house” and that the Laundry is “shipped out” to a third party vendor.

    Salaries, nurses  
    Aides  
    Pharmacy  
    Laboratory  
    Depreciation  
    Laundry  
    Administration  
    Lease (equipment)  

    2. Use the high-low method to separate the mixed costs into fixed and variable.

      Laboratory: Pharmacy:
    Variable $fill in the blank 9 per patient day $fill in the blank 10 per patient day
    Fixed $fill in the blank 11 $fill in the blank 12

    3. The administrator of the orthopedic center estimated that the center will average 4,300 patient days per month. If the center is to be operated as a nonprofit organization, determine the amount it will need to charge per patient day? Round your interim calculations and final answers to the nearest cent.

    $fill in the blank 13 Charge per patient day

    How much of this charge is variable?

    $fill in the blank 14 Variable charge per patient day

    How much of the charge per patient day is fixed?

    $fill in the blank 15 Fixed charge per patient day

    4. Suppose the orthopedic center averages 4,600 patient days per month. How much would need to be charged per patient day for the center to cover its costs? Round your answer to the nearest cent.

    $fill in the blank 16 per patient day

    The main reason why the charge per patient day decreased as the activity output increased is because:

     

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