St. Teresa's Medical Center (STMC) offers a number of specialized medical services, including neuroscience, cardiology, and oncology. STMC's strong reputation for quality medical care allowed it 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 folity is depreciated on a straight line basis. All equipment within the facility is leased Since the clinic had no experience with in patient orthopedic services (for patients recovering from hip and knee replacements, for example), it decided to operate the orthopedic center for two months before determining how much to charge per patient day on an ongoing basis. As a temporary measure the clinic adopted a patient day charge of $190, an amount equal to the fees charged by a hospital specializing in orthopedie care in a nearby city, This initial per day charge was quoted to patients entering the orthopedic center during the test 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 after 60 days was adopted so that any adjustments could be made The orthopedic center opened on January 1. During January, the center had 4,100 patient days of activity. During February, the activity was 4,600 patient days. Costs for these two devels of activity output are as follows: 4,100 Patient 1,600 Patient Days Days Salones, nurses $58,200 $58,200 34,800 Aides 34,800 Pharmacy 254,300 220,000 132,300 145,500 Laboratory Depreciation Laundry 22,800 22,000 198,850 223.100 Administration Lease (equipment) 28,300 28,300 38,600 38,600 Required: 1. Classify each cost as fised, variable, or mixed, using patient days as the activity driver. Assume that the Pharmacy A Laboratory are in house" and that the Laundry is 'whipped out to a third party vendor Salaries, nurses Fixed Aides Fixed Pharmacy Fixed Laboratory Depreciation Fixed Laundry Fixed Administration Fixed Lease (equipment) Fixed 2. Use the high-low method to separate the mixed costs into fixed and variable Laboratory Pharmacy Variable per patient day per patient devy wed 2. Use the high-low method to separate the mixed costs into fixed and variable. Laboratory: Pharmacy: Variable per patient day per patient day Fixed 3. The administrator of the orthopedic center estimated that the center will average 4,200 patient days per month. If the center is to be operated as a nonprofit organization, determine the amount it will 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? 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 averages 4,800 patient days per month. How much would need to be charged per patient day for the center to cover its costs? Round your answer to the nearest cent per patient day The main reason why the charge per patient day decreased as the activity output increased is because
