Chapter 14 Assignment (Break Even) Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. Present revenues and costs are presented below: I Revenues: Charge Patients (6,000 Patient Days) $750,000 Fixed-Price Patients (20,000 Patient Days) 1,800,000 Total Net Revenues $2,550,000 Costs: Fixed Costs $1,170,000 Variable Costs ($45/PD) 1170,000 Total ($90/PD) $2,340,000 Net Income $210,000 Using the information in the table above answer the following two questions 1. What is the BREAK EVEN in patient days for this nursing home, assuming no profit is required? STEP 1: Calculate the AVERAGE NET REVENUE - Total Net Revenues Average Net Income = Total Patient Days STEP 2: Calculate the BREAK-EVEN VOLUME IN UNITS Break-even volume in units = Fixed Cost Price - Variable Costs per PD 2. If volume goes up 10 percent to 28,600 patient days and payer mix is unchanged, what will net income be? You must have the following information to calculate the NEW net income: Average Net Revenue per patient day (calculated in #1 above) Variable Cost per patient day (amount listed in table above) Contribution Margin per patient day (Avg Net Revenue-Variable Cost = CM) STEP 1: Calculate your Total Contribution Margin (Change in units x CM) . STEP 2: Calculate your NEW net income (Original Net Income + Total CM from Additional Patient Days)