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Suppose a hospital unit wants to offer a new service. The service has a fixed cost...

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Finance

  1. Suppose a hospital unit wants to offer a new service. Theservice has a fixed cost of $200,000. The service has three DRGs.The number of patients for a specific DRG, their average variablecosts per unit, and their average price per unit are given in thetable below.

No. of Patients

Variable cost Rate $

Price Rate $

DRG1

200

300

450

DRG2

400

1200

1500

DRG3

350

900

1150

            

  1. Find the break-even volume.
  2. What is the assumption here about the product-mix, goingforward into the future?
  3. At the break-even volume, compute the expected volumes forindividual DRGs.

Answer & Explanation Solved by verified expert
3.8 Ratings (629 Votes)
a First we will calculate product mix Weight of a DRG Percentage of patients with a DRG No of patients with a DRG total patients Total patients Sum of patients all DRGs 200 400 350 950 WE get the following product mix Weight of DRG1 No of patients with DRG1 Total patients 200 950 2105 Weight of DRG2 No of patients with DRG2 Total patients 400 950 4211    See Answer
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Transcribed Image Text

Suppose a hospital unit wants to offer a new service. Theservice has a fixed cost of $200,000. The service has three DRGs.The number of patients for a specific DRG, their average variablecosts per unit, and their average price per unit are given in thetable below.No. of PatientsVariable cost Rate $Price Rate $DRG1200300450DRG240012001500DRG33509001150            Find the break-even volume.What is the assumption here about the product-mix, goingforward into the future?At the break-even volume, compute the expected volumes forindividual DRGs.

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