4. Break-even and other CVP relationships
Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.
a. How many patient days does the hospital need to break even?
b. What level of revenue is needed to earn a target income of $540,000?
c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?