Cost Behavior, High-Low Method, Pricing Decision St. Teresa's Medical Center (STMC) offers a number of speciabzed medical services, including neuroscience, cardiology, and oncology, STMC's strong reputation for quality medical care allowed is to branch out into other services. It is now ready to expand its orthopedic services and has just added a free-standing orthopedic clinic offering a full range of outpatient, surgical, and physical therapy services. The cost of the orthopedic facility is depreciated on a straight-line basis. All equipment within the faclity leased. Since the clinic had no experience with in-patient orthopedic services (for patients recovering from hip and knee replacements, for example), it decibed to operate the orthopedic center for two months before determining how much to charge per patient day on an ongaing basis. As a temporary measure, the clinic adopted a patient-day charge of $190, an arnount equal to the fees charged by a hospital specialining in orthopedic care in a neartiy eity. This initial per-day charge was quoted to patients entering the orthopedic center during the firat two months with assurances that if the actual operating costs of the new center justified it, the charge could be less. In no case would the charges be more. A temporary policy of billing arter 60 days was adopted so that any adjustments could be mace. The orthopedic center opened on January 1. During January, the center had 4,000 patient days of activty. During February. the activity was 4,400 patient days. Costs for these two levels of octivity output are as follows: 1. Classify each cost as fuxed, variable, or mixed, using patient days as the activity driver. Assume that the Pharmacy \& Laboratory are "in house" and that the Laundry is "shipped out" to a third party vendor. 2. Use the high-iow method to separate the mixed costs into fixed and variable. 3. The administrator of the orthopedic center eatimated that the center will average 4,100 patient days per month. If the center is to be operated as a nonprofit organization, determine the amount it wil need to charge per patient day? Round your interim calculations and final answers to the nearest cent. Charge per patient day How much of this charge is variable? 18 Variable charge per patient day How much of the charge per patient day is fixed? Fixed charge per patient day 4. Suppose the orthopedic center averoges 4,700 patient days per month. How much would need to be eharged per patient cay for the center to cover is coits? Round your answer to the nearest cent. 3 perpatient day The main reason why the charge per patient day decreased as the activity output increased is because