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year is summarized below Revenue Variable expenses Direct fixed expenses Allocated common fixed expenses ER Department $3,000,000 1,400,000 700,000 1,000,000 All Other Departments total $8,000,000 3,900,000 2,000,000 1,000,000 If the ER department is eliminated, all of the direct fixed expenses would be eliminated as well. If the ER department eliminated the revenue for the other departments in the hospital would drop 30% since some patients start at ER visits and are admitted to the hospital and treated by other departments.

year is summarized below Revenue Variable expenses Direct fixed expenses Allocated common fixed expenses ER Department $3,000,000 1,400,000 700,000 1,000,000 All Other Departments total $8,000,000 3,900,000 2,000,000 1,000,000 If the ER department is eliminated, all of the direct fixed expenses would be eliminated as well. If the ER department eliminated the revenue for the other departments in the hospital would drop 30% since some patients start at ER visits and are admitted to the hospital and treated by other departments.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Grey-Sloan Memorial Hospital is considering eliminating the Emergency Department. Financial data for the past year is summarized below. ER Department $3,000,000 1,400,000 700,000 1,000,000 Revenue Variable expenses Direct fixed expenses Allocated common fixed expenses All Other Departments total $8,000,000 3,900,000 2,000,000 1,000,000 If the ER department is eliminated, all of the direct fixed expenses would be eliminated as well. If the ER department is eliminated the revenue for the other departments in the hospital would drop 30% since some patients start at ER visits and are admitted to the hospital and treated by other departments. Should Grey-Sloan eliminate or keep the ER department? If Grey-Sloan eliminates the ER department, operating income would by $ Keep because operating income would decrease by $2,130,000 Eliminate because operating income would decrease by $3,000,000 Eliminate because operating income would increase by $4,700,000 Keep because operating income would decrease by $3,300,000
Transcribed Image Text:Grey-Sloan Memorial Hospital is considering eliminating the Emergency Department. Financial data for the past year is summarized below. ER Department $3,000,000 1,400,000 700,000 1,000,000 Revenue Variable expenses Direct fixed expenses Allocated common fixed expenses All Other Departments total $8,000,000 3,900,000 2,000,000 1,000,000 If the ER department is eliminated, all of the direct fixed expenses would be eliminated as well. If the ER department is eliminated the revenue for the other departments in the hospital would drop 30% since some patients start at ER visits and are admitted to the hospital and treated by other departments. Should Grey-Sloan eliminate or keep the ER department? If Grey-Sloan eliminates the ER department, operating income would by $ Keep because operating income would decrease by $2,130,000 Eliminate because operating income would decrease by $3,000,000 Eliminate because operating income would increase by $4,700,000 Keep because operating income would decrease by $3,300,000
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