Melford Hospital operates a ge

Melford Hospital operates a general hospital but rents space to
separately owned entities rendering specialized services such as
pediatrics and psychiatry. Melford charges each separate entity for
patients’ services (meals and laundry) and for administrative
services (billings and collections). Space and bed rentals are
fixed charges for the year, based on bed capacity rented to each
entity. Melford charged the following costs to Pediatrics this
year: Patient Services Bed Capacity (Variable) (Fixed) Dietary
$1,280,000 Janitorial $152,000 Laundry 600,000 Laboratory 960,000
Pharmacy 736,000 Repairs and maintenance 64,000 General and
administrative 2,800,000 Rent 3,200,000 Billings and collections
640,000 Total $4,216,000 $6,216,000 In addition to these charges
from Melford Hospital, Pediatrics incurred the following personnel
costs: Annual Salaries* Supervising nurses $216,000 Nurses 432,000
Assistants 384,000 Total $1,032,000 * These salaries are fixed
within the ranges of annual patient-days considered in this
problem. During the year, Pediatrics charged each patient $400 per
day, had a capacity of 128 beds, and had revenues of $12,800,000
for 365 days. Pediatrics operated at 100% capacity on 90 days
during this period. It is estimated that during these 90 days, the
demand exceeded 160 beds. Melford will have 32 additional beds
available for rent next year. If Pediatrics rents the beds from
Melford, the additional rental would proportionately increase
Pediatrics’ annual fixed charges that are based on bed capacity.
Required

a. Calculate the minimum number of patient-days required for
Pediatrics to break even next year, if the additional beds are not
rented. Patient demand is unknown, but assume that revenue per
patient-day, cost per patient-day, cost per bed, and salary rates
next year will be consistent with the current year. Note: Round
your answer up to the nearest whole unit (for example, round 41.2
to 42). Answer patient-days

b. Assume Pediatrics rents the extra 32 -bed capacity from
Melford during the busy 90-day period. Determine the net increase
or decrease in earnings by preparing a schedule of increases in
revenues and costs for next year. Assume that patient demand,
revenue per patient-day, cost per patient-day, cost per bed, and
salary rates remain the same as the current year. Note: Do not use
a negative sign with your answer. Answer $Answer

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