HealthSouth Corporation claims to be the nations largest owner and operator of inpatient rehabilitation hospitals in terms of revenues, number of hospitals, and patients treated and discharged. As of December 31, 2014, the company derived 94.5 percent of its revenues from inpatient services. During 2014, it treated and discharged 134,515 patients, and the average length of a patients stay was 13.2 days. If one patient occupying one bed for one day represents a patient-day, then HealthSouth produced 1,775,598 patient-days of output during 2014 (134,515 13.2 = 1,775,598). During this period, HealthSouth incurred depreciation costs of $107,700,000. For the purpose of this problem, assume that all of this depreciation related to the property, plant, and equipment of inpatient hospitals.

1. If HealthSouths management had estimated the profit per patient-day of service based on its budgeted production of 1,850,000 patient-days, would you expect its actual profit per patient-day of service to be higher or lower than expected? Explain.