Susquehanna Medical Center operates a general hospital in northeastern Pennsylvania. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Susquehanna charges each separate entity for common services, such as patients' meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Susquehanna Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x5:
Patient Days (variable)
Bed Capacity (fixed)
Dietary
$510,000
—
Janitorial
—
$74,000
Laundry
$280,000
—
Laboratory
$410,000
—
Pharmacy
$350,000
—
Repairs and maintenance
—
$36,000
General and administrative
—
$1,350,000
Rent
—
$1,500,000
Billings and collections
$220,000
—
Total
$1,770,000
$2,960,000
During the year ended June 30, 20x5, Pediatrics charged each patient an average of $300 per day, had a capacity of 60 beds, and had revenue of $6 million for 365 days. In addition, Pediatrics directly employed personnel with the following annual salary costs per employee: supervising nurses, $25,600; nurses, $20,100; and aides, $8,900.
Susquehanna Medical Center has the following minimum departmental personnel requirements, based on total annual budgeted patient days:
Annual Patient Days
Supervising Nurses
Nurses
Aides
Up to 22,000
4
10
20
22,001 to 26,000
5
14
25
26,001 to 29,200
5
16
31
Pediatrics always employs only the minimum number of required personnel. Salaries of supervising nurses, nurses, and aides are therefore fixed within ranges of annual patient days.
Pediatrics operated at 100 percent capacity on 80 days during the year ended June 30, 20x5. Administrators estimate that on these 80 days, Pediatrics could have filled another 10 beds above capacity. Susquehanna Medical Center has an additional 10 beds available for rent for the year ending June 30, 20x6. Such additional rental would increase Pediatrics' fixed charges based on bed capacity. (In the following requirements, ignore income taxes.)
Susquehanna Medical Center
Computation of Change in Earnings
For the year ended June 20X6
Increase in Revenue?
Increase in Expenses:
Variable Charges by medical center?
Fixed Charges by medical center?
Salaries?
Total increase in Expenses?
Net change in Earnings from rental in additional 20 beds?
