Expert Answer:Question 1: Find the Contribution Margin for the T

Answer & Explanation:Answer 3 questions and show your work, please provider answers on answer sheet. The question and cost benefit is there to help you.
questionset_assignment_6.docx

cost_benefit_for_assignment_6.docx

answersheet_for_assignment_6.docx

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a6-s2 [for teacher’s use]
Econ 240: Assignment 6: Question Set 6
Topic: Contribution and Profit Margins
Grade Points: 5
Completion = 1 pt
Question 1 = 2 pt
Question 2 = 2pts
Question 3 = 1 pt extra credit for getting it on your own
Download the document entitled “Cost&Benefit-6. The data for answering the questions
are in that document.
Question 1: Finding the Contribution Margin for the Trauma Center
Step One: The contribution margin is the proportion of Operating Revenues that remain
after Operating Costs are paid. Divide the Net Operating Revenue by the Operating Revenue
and express the quotient as a decimal (to the second decimal place or as a percentage.
What is the Contribution Margin?
Question 2: Finding the Profit Margin for the Trauma Center
Step One: The profit margin is the proportion of Total Revenues (Operating plus NonOperating Revenues) that remain after all costs have been paid, including taxes. Divide the
Net Earnings After Tax by the Total Revenue (sum of operating and non-operating
revenues) and express the quotient as a decimal (to the third decimal place) or as a
percentage (to the first decimal place).
What is the Profit Margin?
Question 3: Setting fees per overnight stay by their target contribution margin
(Do not use the Cost & Benefit numbers to answer this problem. Only use the numbers
given in the question below.)
Let us suppose that a hospital wants to set their fees for an overnight stay such that the
contribution margin on a hospital room will be 32%. The cost to the hospital of an
overnight stay (staff, physical equipment, and supplies) is $410. What fee should they
charge to obtain a contribution margin of 32%? [Hint: if the contribution margin is 32%,
then the $410 cost is 68% of Operating Revenues.]
What is the target fee for an overnight stay? In other words, what must the Operating
Revenues from that one room be?
Copyright © Patricia Awerbuch, 2014. This work may not be used, reproduced, or
distributed outside the Drexel LeBow College of Business course Econ 240 Economics of
Health Care Systems without the express written permission of the author.
1
a6-s2 [for teacher’s use]
Econ 240: Assignment 6: Costs and Benefits for Question Set 6
Use this information together with the instructions on your Question Set to answer the questions.
OPERATING AND NON-OPERATING COSTS AND REVENUES FOR TRAUMA CENTER
This document rearranges our variable and fixed cost information into the Operating and NonOperating Costs that would appear on an Income Statement, so that a contribution margin and
profit margin can be calculated. [Notice that Revenues are now shown in a right-hand column and
costs are shown in a left-hand column.]
Operating Costs relate directly to patient care. Our previous labor costs, equipment costs, and a
portion of the building cost are directly related to patient care and reported as Operating Costs.
The remainder of the building and administrative costs are reported as Non-Operating costs.
Health care facility Income Statements may report Non-Operating Revenue separately as well,
since an accurate calculation of contribution margin requires that patient fees alone be set against
the operating costs incurred to treat patients.
Operating Revenues:
Surgeries (patient fees)
Operating Cost:
Labor Cost:
Other Variable Cost:
Depreciation:
Building:
OR Equipment:
Ambulance (Basic and Advanced)
Interest:
Building:
OR Equipment:
Ambulance (Basic and Advanced)
NET OPERATING REVENUE
$8,456,210
$3,774,852
$ 487,078
$9,97,292
$ 474,901
$ 110,810
$ 153,429
$ 73,062
$ 17,048
$6,088,471
Non-Operating Revenue
Grants and Donations
Non-Operating Cost:
Other Fixed Cost:
Depreciation: Building
Interest: Building
NET EARNINGS BEFORE TAX
Tax
NET EARNINGS AFTER TAX
_______________
$2,367,739
$2114053
$1,923,788
$ 887,902
$ 147,984
$2,959,674
$ 243,539
_______________
$1,522,118
$1,278,579
2
Copyright © Patricia Awerbuch, 2014. This work may not be used, reproduced, or distributed
outside the Drexel LeBow College of Business course Econ 240 Economics of Health Care Systems
without the express written permission of the author.
a6-s2 [for teacher’s use]
STUDENT NAME:
Econ 240: Assignment 6: Answer Sheet for Question Set 6
Grade Points: 5
Completion = 1 pt
Question 1 = 2 pt
Question 2 = 2pts
Question 3 = 1 pt extra credit for getting it on your own
Question 1:
Find the Contribution Margin for the Trauma Center (show calculations)
Question 2:
Find the Profit Margin for the Trauma Center (show calculations)
Question 3:
What is the target fee for an overnight stay?

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