(The following data apply to the next three questions.)

Assume the following cost and revenue data for General Hospital: Fixed costs = $15,000,000. Variable cost per inpatient day = $250. Revenue per inpatient day = $1,000.

1. What is the expected profit at a volume of 25,000 inpatient days?

a. -$3,750,000 b. $ 0 c. $1,750,000 d. $2,750,000 e. $3,750,000

2. What revenue per inpatient day is required to obtain a profit of $1,000,000 at a volume of 25,000 patient days?

a. $750 b. $790 c. $850 d. $890 e. $950

3. Which of the follow statements best describes the contribution margin?

a. The contribution margin is defined as fixed costs minus variable costs.

b. Under fee-for-service, the contribution margin is the dollar amount of each unit of service that is available first to cover fixed costs and then to contribute to profit. c. Under capitation, the contribution margin is the dollar amount of each PMPM premium that is available to pay for administration overhead.

d. The contribution margin is defined as revenues minus fixed costs.

e. Under capitation, the total contribution margin is the contribution margin multiplied by the PMPM premium rate.