How is understanding the breakeven point helpful for a manager in everyday operations management? How can Excel be used to automate the calculation process?

Benchmarking for Decision-Making

Discuss the following example:

Your nursing home defines output as a patient day. The present volume is 18,000 patient days. The average cost per day is $95.00. Present revenues and costs are presented below.

Patient-Days

Amount

Revenues:

Charge Patients

6,000

$ 750,000

Fixed Price Patients

20,000

$ 1,800,000

Total Revenues

26,000

$ 2,550,000

$ 98.08

Costs:

Fixed Costs

$ 1,170,000

Variable Costs

$ 45.00

$ 1,170,000

Total Costs

$ 2,340,000

Profit or Net Income

$ 210,000

Discussion Prompt:

What is the breakeven inpatient days for this nursing home, assuming no profit is required? If volume goes up 10 percent to 28,600 patient days and payer mix is unchanged, what will net income be? Respond to the following questions:

Calculate the results.

How is understanding the breakeven point helpful for a manager in everyday operations management?

How can Excel be used to automate the calculation process?

What are some of the variables that can be changed in order to alter the breakeven point?

Discuss the breakeven analysis and question responses with at least 2 of your cohort colleagues.

How is understanding the breakeven point helpful for a manager in everyday operations management? How can Excel be used to automate the calculation process?
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