Delaware Medical Center operates a general hospital. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Delaware charges each separate entity for common services, such as patients' meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Delaware Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x1:

Patient Days (variable) Bed Capacity (fixed)

Dietary $ 510,000

Janitorial $ 80,000

Laundry 270,000

Laboratory 410,000

Pharmacy 320,000

Repairs and maintenance 38,000

General and administrative 1,300,000

Rent 1,560,000

Billings and collections 230,000

Total $ 1,740,000 $ 2,978,000

During the year ended June 30, 20x5, Pediatrics charged each patient an average of $400 per day, had a capacity of 60 beds, and had revenue of $6 million for 365 days. In addition, Pediatrics directly employed personnel with the following annual salary costs per employee: supervising nurses, $25,300; nurses, $20,700; and aides, $8,200.

Delaware Medical Center has the following minimum departmental personnel requirements, based on total annual patient days:

Annual Patient Days Aides Nurses Supervising Nurses

Up to 22,000 20 10 4

22,001 to 26,000 25 14 5

26,001 to 29,200 31 16 5

Pediatrics always employs only the minimum number of required personnel. Salaries of supervising nurses, nurses, and aides are therefore fixed within ranges of annual patient days.

Pediatrics operated at 100 percent capacity on 85 days during the year ended June 30, 20x1. Administrators estimate that on these 85 days, Pediatrics could have filled another 20 beds above capacity. Delaware Medical Center has an additional 20 beds available for rent for the year ending June 30, 20x2. Such additional rental would increase Pediatrics' fixed charges based on bed capacity. (In the following requirements, ignore income taxes.)

Required:

1. Calculate the minimum number of patient days required for Pediatrics to break even for the year ending June 30, 20x2, if the additional 20 beds are not rented. Patient demand is unknown, but assume that revenue per patient day, cost per patient day, cost per bed, and salary rates will remain the same as for the year ended June 30, 20x1.

2. Assume that patient demand, revenue per patient day, cost per patient day, cost per bed, and salary rates for the year ending June 30, 20x2, remain the same as for the year ended June 30, 20x1. Prepare schedule of Pediatrics' increase in revenue and increase in costs for the year ending June 30, 20x2. Determine the net increase or decrease in Pediatrics' earnings from the additional 20 beds if Pediatrics rents this extra capacity from Delaware Medical Center.

Complete question by entering your answers in the tabs below.

Required 1Required 2

Calculate the minimum number of patient days required for Pediatrics to break even for the year ending June 30, 20x2, if the additional 20 beds are not rented. Patient demand is unknown, but assume that revenue per patient day, cost per patient day, cost per bed, and salary rates will remain the same as for the year ended June 30, 20x1. (Do not round intermediate calculations and round your final answer up to the nearest whole number.)

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Break-even point patient-days

Assume that patient demand, revenue per patient day, cost per patient day, cost per bed, and salary rates for the year ending June 30, 20x2, remain the same as for the year ended June 30, 20x1. Prepare a schedule of Pediatrics' increase in revenue and increase in costs for the year ending June 30, 20x2. Determine the net increase or decrease in Pediatrics' earnings from the additional 20 beds if Pediatrics rents this extra capacity from Delaware Medical Center. (Do not round intermediate calculations. Round your final answer to the nearest whole number. Enter an increase in earnings as a postive amount or a decrease in earnings as a negative amount.)

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DELAWARE MEDICAL CENTER

Computation of Change in Earnings From Rental of Additional Beds

For the Year Ended June 30, 20x2

Increase in revenue

Increase in expenses:

Variable charges by medical center

Fixed charges by medical center

Salaries

Total increase in expenses

Net change in earnings from rental of additional 20 beds