Case 1 Dubai Medical Centre

Dubai Medical Centre - Cost To Pediatric Year Ended 30, 20x1

Dietary $ 600,000 $ - Janitorial $ - $ 70,000 Laundry $ 300,000 $ - Laboratory $ 450,000 $ - Pharmacy $ 350,000 $ - Repairs And Maintenance $ - $ 30,000 General And Administrative $ - $ 1,300,000 Rent $ - $ 1,500,000 Billings and Collections $ 300,000 $ - Total $ 2,000,000 $ 2,900,000

ADDITIONAL INFOCapacity 60 BedsEach patient charge (Revenue per patient) $ 300 Per DayRevenue $ 6,000,000 Per 365 Days

Annual Salary Cost - Fix Cost / YearSupervising Nurses $ 25,000 Nurses $ 20,000 Aides $ 9,000 Total Fix Cost / Year $ 54,000

Dubai Medical Center - Minimum Departemental PersonnelAnnual Patient Days Aides Nurses

Up to 22000 20 10 422001 to 26000 25 14 526001 to 29200 31 16 5

Dubai Medical CenterBreak-Even Point in Patient Days: Pediatrics

For the Year Ended June 30, 20x2

Fixed costs:Fixed cost (bed capacity) $ 2,900,000 Supervising nurses ($ 25,000 x 4) $ 100,000 employed minimum number of required personne;Nurses ($ 20,000 x 10) $ 200,000 employed minimum number of required personne;Aids ($ 9,000 x 20) $ 180,000 employed minimum number of required personne;Total fixed costs $ 3,380,000

Contribution margin per patient-day:Revenue per patient-day $ 300

Patient Days (Variable)

Bed Capacity (Fixed)

Supervising Nurses

Variable cost per patient-day($6,000,000 / $300 ) = patient days 20,000 ($2,000,000 /20,000 ) = patient days $ 100 $ 100

Contribution margin per patient-day $ 200

Break-even point in patient days:Total fixed costs $ 3,380,000 Contribution margin per patient-day $ 200 Break-even point in patient days 16,900

Dubai Medical CenterLoss from Rental of Additional 20 Beds: Pediatrics

For the Year Ended June 30, 20x2

Increase in revenue:Additional beds 20Days 90Charge per day ($) $ 300 Increase in revenue ($) $ 540,000

Increase in expenses:Variable costAdditional beds 20Days 90Charge per day ($) $ 100 Variable cost $ 180,000

Fixed costFixed cost (from bed capacity) $ 2,900,000 Bed capacity 60Fixed cost per bed ($ 2,900,000 / 60) $ 48,333.33 Additional beds 20Fixed cost for 20 Additional bed $ 966,667

Total Increase in Expenses $ 1,146,667 Less Earning by rental additional 20 beds $ 606,667

conclusion : increase in expenses higher than increase in revenue

Question :

Condition :- Patient demand is unknown- Assume this condition remain the same with year ended June 30, 20x1: * Revenue per patient day * Cost per patient day * Cost per bed * Salary ratesAnswer:

1. Minimum number of patient days required for Pediatric for year ending June 30, 20x2, if additional 20 beds are not rented?

Minimum number of patient days required ~ Break Even Point In Patient Days= 16,900

2. Net increase or decrease in Pediatrics by rent additional 20 bed from Dubai Medical Centre?- Assume this condition remain the same with year ended June 30, 20x1: * Patient demand * Revenue per patient day * Cost per patient day * Cost per bed * Salary ratesAnswer:- Less earning by rental additional 20 beds Compare between revenue and expenses: Increase revenue $ 540,000 Increase expenses a. Variable cost $ 180,000 b. Fixed cost $ 966,667

$ 1,146,667 Discrepancy is as less earning by rent additiona 20 bed $ 606,667

employed minimum number of required personne;employed minimum number of required personne;employed minimum number of required personne;