David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer problems 1–3.

Square Footage Direct Expenses Lab Tests
Utilities $ 200,000
Administration 2,000 500,000
Laboratory 2,000 625,000
Day-op Suite 3,000 1,400,000 4,000
Cystoscopy 1,500 300,000 500
Endoscopy 1,500 600,000 500
Total 10,000 $ 3,375,000 5,000

1. What are the Day Op Suite’s total expenses?

2. What are the Cystoscopy Department’s total expenses?

3. What are the Endoscopy Department’s total expenses?

The information below applies to problems 4 and 5. Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. 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

Using this information, answer the following two questions:

4. What is the breakeven in patient days for this nursing home, assuming no profit is required?

5. If volume goes up 10% to 28,600 patient days and payer mix is unchanged, what will net income