The Recovery District General Hospital operates a separate department specifically for private health patients. In 19XO the patients paid a fixed fee of £85 per day for the use of hospital facilities, and this fee is expected to remain unchanged for 19X1. In addition, the patients pay an extra fee to the physicians for their services. This is a private arrangement between the patient and the physician, and has no effect on the finances of the hospital. For the year ending 31 December 19XO the department received revenue of £1396125 for private health care. Actual expenditure charged to the department for 19XO was as follows:

a All variable expenses It is estimated that all the costs will increase by 10% in 19X1. In addition, rent and rates of £400000 was charged directly to the department, since it is the sole occupier of a separate building within the hospital grounds. This figure is expected to increase to £500000 for 19X1 .
The salaries of the nursing staff are charged to the department at the end of the year according to the following schedule:

The average salary of the nursing staff for 19X 1 is estimated at £7000 per annum (actual for 19XO £6500 p.a). The department has a maximum capacity of 60 beds, but in 19XO a number of beds were unoccupied because of insufficient demand, and there have been demands from a number of parties that the department is losing money and should be closed down.
You are required to present the appropriate financial information for consideration to assist in the decision whether or not to close down the department. You are also required to indicate any additional information that should be obtained before the final decision is taken.

Transcribed Image Text:

Basis of allocation Bed Patient-days capacity () Meals 220000 Porter's salaries () 12000 Laundry 120000 Laboratory 260000 Maintenance 37000 General administrative services 237 000 Other expenses 20000 657000 249 000