1. What is the breakeven in patient days, assuming no profit is required? 2. If volume goes up 10 percent to 28,600 patient days and the payer mix is unchanged, what will net income be?

Question

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Case study 2 involves breakeven analysis and variance analysis for a skilled nursing facility. (Variance analysis is covered in Week 8.) Be sure to show your work.

Use the information in the table below to answer questions 1 and 2.
Your skilled nursing facility defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. Present revenues and costs are shown below:
Revenues:
Charge Patients (6,000 Patient Days) $750,000
Fixed-Price Patients (20,000 Patient Days) 1,800,000
Total Net Revenues 2,550,000
Costs:
Fixed Costs $1,170,000
Variable Costs ($45/PD) 1,170,000
Total ($90/PD) $2,340,000
Net Income$210,000
1. What is the breakeven in patient days, assuming no profit is required?
2. If volume goes up 10 percent to 28,600 patient days and the payer mix is unchanged, what will net income be?
Use the following information to answer questions 3 through 7.
Standard Cost Profile
Lab Treatment SU #12
Expected Treatments = 1,000
Quantity Quantity Unit Variable Average Average
Resource Variable Fixed Cost Cost Fixed Cost Total Cost
Labor 0.80 0.80 $16.00 $12.80 $12.80 $25.60
Supplies 7.00 0 1.10 7.70 0 7.70
$20.50 $12.80 $33.30
Actual Month Cost
Lab Treatment SU #12
Actual Treatments = 1,100
Quantity Unit Total
Resource Used Cost Cost
Labor 1,600 $17.00 $27,200
Supplies 7,500 1.00 7,500
$34,700
For questions 3 through 7, calculate:
3. Efficiency Variance—Labor
4. Efficiency Variance—Supplies
5. Price Variance—Labor
6. Price Variance—Supplies
7. Volume Variance

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