PART 1. Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The
average cost per day is $90. Present revenues and costs are presented below:
Revenues:
Charge patients (6,000 patient days)
$750,000
Fixed-price patients (20,000 patient days)
$1,800,000
Total net revenues
$2,550,000
Costs:
Fixed costs
$1,170,000
Variable costs ($45/PD)
$1,170,000
Total ($90/PD)
$2,340,000
Net income
$210,000
If volume goes up 10% to 28,600 patient days and payer mix is unchanged, what will the net income be? (show
your work) Please explain in detail
PART 2
Briefly, list and describe the 10 requirements for effective financial planning and policymaking.
Sample Solution