Assume that a certain nursing home has two categories of payers. Medicaid pays $60.00 per day and private pay patients pay the established per diem, but approximately 10 percent of private pay charges are not collected. If 50 percent of the patients are Medicaid and 50 percent are private pay, what rate must be set to generate $150,000 in profit? Variable costs are $45.00 per day and fixed costs are expected to be $1,000,000. Expected volume is 50,000 patient days.

Using this data and assuming that the nursing home charges $100 per day, what would be the nursing homes required volume (in patient days) in order to make $150,000 profit?

Medicaid patients = (50%) x (50,000) =25,000

Private patients = (50%) x (90%) x (50,000) = 22,500

Profit = Revenue Expenses

150,000 = $60 (25,000) + 22,500x 3,250,000

150,000 60 (25,000) + 3,250,000 = 22, 500x

1,900,000 = 22,500x

1,900,000 22,500 = x

X= $84.44

How to answer # 2?