This is specifically Management Accounting.

2-48 Hospital Costs Metropolitan City Hospital is unionized. In 19X3 nurses received an average annual salary of $37,000. The hospital administrator is considering how the contract with nurses should be changed for 19X4. In turn, the charging of nursing costs to each department might also be changed Cases Each department is accountable for its financial performance. Revenues and expenses are allocated to departments. Consider the expenses of the obstetrics department in 19X3: Variable espenses (based on 19x paenEunr Laundry Laboratony Pharmacy Maintenance 5 310,000 160,000 600,000 400,000 50,000 130,000 $1,650,000 Total Fixed expenses (based on number of beds) are Rent General administrative services Janitorial Maintenance Other Total $2,000,000 1,500,000 100,000 100,000 200,000 $3,900,000 Nurses are assigned to departments on the basis of annual patient-days as follows Volume Level Number of in Patient-Days 10,000-12,500 12,500-16,000 Nurses 30 35 Total patient-days are the number of patients multiplied by the number of days they ard hospitalized. Each department is charged for the salaries of the nurses assigned to it. During 19X3 the obstetrics department had a capacity of 60 beds, billed each patient an average of $500 per day, and had revenues of $7.5 million. 2. Compute the 19X3 patient-days that would have been necessary for the obstetrics 3. Compute the 19X3 patient-days that would have been necessary for the obstetrics 4. Suppose Obstetrics must pay $120 per patient-day for nursing services. This plan Required1. Compute the 19X3 volume of activity in patient-days. department to recoup all fixed expenses except nursing expenses. department to break even including nurses' salaries as a fixed cost. would replace the two-level fixed-cost system employed in 19X3. Compute what the break-even point in patient-days would have been in 19X3 under this plan