Care clinic Ltd operates 200-bed hospital and offers a number of specialised medical services. Hospital facilities and equipment are leased on long term basis. The Hospital charges $250 per patient day. On the basis of past cost data, Care clinic has estimated its variable costs as $182.80 per patient-day. The hospital administrator estimated that the hospital will have on average 4,600 patients per month.

Required:

a) How much hospital needs to charge per day to break even at this level of activity.

b) Refer to original data in the question. How many patients must hospital have on average each month to earn a target profit of $60,000?

c) What is the difference between linear and non-linear cost-function. Give an example of each type of cost function.