Part II. Short Problems 16. (10 points) Hospitals measure their volume in terms of patient-days. Suppose a large hospital has fixed costs of $55.2 million per year and variable costs of $600 per patient-day. Daily revenues vary among two classes of patients: (1) self-pay patients (S) who pay an average of $1,000 per day and (2) non-self-pay patients (NS) who are the responsibility of insurance companies and government agencies and who pay an average of $800 per day. Assume that 20 percent of the patients (1 out of 5) are self-pay. Questions: a. (4 points) Compute the break-even point in patient-days per class of patient, assuming that the hospital maintains its planned mix of patients. b. (4 points) Suppose that the hospital could shift its mix of patients so that 25% of the patient-days (1 out of 4) were self-pay. Compute the new break-even point. c. (2 points) Given this information, how might the hospital adjust its product mix to improve its profitability? What additional information is needed to determine the optimal product mix?

Part II. Short Problems 16. (10 points) Hospitals measure their volume in terms of patient-days. Suppose a large hospital has fixed costs of $55.2 million per year and variable costs of $600 per patient-day. Daily revenues vary among two classes of patients: (1) self-pay patients (S) who pay an average of $1,000 per day and (2) non-self-pay patients (NS) who are the responsibility of insurance companies and government agencies and who pay an average of $800 per day. Assume that 20 percent of the patients ( 1 out of 5 ) are self-pay. Questions: a. (4 points) Compute the break-even point in patient-days per class of patient, assuming that the hospital maintains its planned mix of patients. b. ( 4 points) Suppose that the hospital could shift its mix of patients so that 25% of the patient-days ( 1 out of 4 ) were self-pay. Compute the new break-even point. (2 points) Given this information, how might the hospital adjust its product mix to improve its profitability? What additional information is needed to determine the optimal product mix