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Southwest Hospital has an operating room used only for eye surgery. The annual cost of rent, heat, and ectricity for the operating room and its equipment is $180,000, and the annual salaries for the people who staff this room total $270,000.
Each surgery performed requires the use of $380 worth of medical supplies and drugs. To promote goodwill, every patient receives a bouquet of flowers the day after surgery; In addition, one quarter of the patients require dark glasses, which the hospital provides free-of-charge. It costs the hospital$15 for each bouquet of flowers and $20 for each pair of glasses.
The hospital receives a payment of $1000 for each eye operation performed.

1. Identify the revenue per case and the annual fixed and variable costs, for running the operating room.
2. How many eye operations must the hospital perform each year in order to break even?
there is more parts for that question i will post it after answering these two parts

2006-11-01 22:09:13 · 1 answers · asked by dreamer 1 in Education & Reference Homework Help

can we say that the annual variable cost is the cost of each case so to be like
annual variable cost =400x*12
THATS the other parts of the question
3. Southwest Hospital currently averages 70 eye operations per month. One of the nurses has just learned about a machine that would reduce by $50 per patient the amount of medical supplies needed. It can be leased for $50,000 annually. Keeping in mind the financial costs! benefits, advise the hospital on whether or not they should lease this machine.
4. An advertising agency has proposed to the hospital’s president that she spend $10,000 per month on television and radio advertising to persuade people that Southwest Hospital is the best place to have any eye surgery performed. The advertising firm estimates that such publicity would increase business by 40 operations per month. if they are correct and if this increase is not big enough to affect fixed costs, what impact would this advertising have on the hospital’s profits?

2006-11-02 19:43:56 · update #1

1 answers

Step 1: Find the Revenue per surgery, using only the amount of money spent on the surgery itself.
Payment: $1000
Costs: $380 in supplies, $15 in flowers, $20 * .25 in glasses ($20 * the 25% of people who need it = $400/patient

Revenue = payment - cost = $1000 - $400 = $600/case

Step 2: Find the annual costs.
The fixed costs are from the cost of the room itself (180K) and the salaries of the staff (270K).
Fixed costs: $180K + $270K = $450K.

There are no variable annual costs given in the problem, so you only need to worry about the fixed annual costs.

Step 3: Find break even point.
The break even point is where the number of cases * the revenue/case equals the fixed costs.
x * $600 = $450K
x = $450K / $600 = 750 surgeries (solution)

2006-11-02 05:21:14 · answer #1 · answered by ³√carthagebrujah 6 · 1 0

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