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Delaware Medical Center operates a general hospital. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Delaware charges each separate entity for common services, such as patients' meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Delaware Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x1: Dietary Janitorial Patient Days (variable) Bed Capacity (fixed) 70,000 600,000 Laundry 300,000 Laboratory 450,000 Pharmacy 350,000 Repairs and maintenance 30,000 General and administrative 1,300,000 Rent 1,500,000 Billings and collections 300,000 Total 2,000,000 $ 2,900,000 During the year ended June 30, 20x1, Pediatrics charged each patient an average of $300 per day. had a capacity of 60 beds, and had revenue of $6 million for 365 days. In addition, Pediatrics directly employed personnel with the following annual salary costs per employee supervising nurses. $25,000, nurses, $20,000; and aides, $9,000 During the year ended June 30, 20x2, Pediatrics had 60 rented beds. Assume that one year is 365 days throughout the case. Therefore, Pediatrics' maximum capacity (capacity of fully utilizing all beds 100%) was 21,900 patient days (365 days 60 beds). However, in this year, the department had18,500 patient days. Delaware Medical Center has the following minimum departmental personnel requirements, based I Arascibilite Investinate TY Form Delaware Medical Center has the following minimum departmental personnel requirements, based on total annual patient days: Annual Patient Days Up to 22,000 22,001 to 26,000 26,001 to 29,200 Aides Nurses Supervising Nurses 910 20 10 25 14 31 16 4 55 Pediatrics always employs only the minimum number of required personnel. Salaries of supervising nurses, nurses, and aides are therefore fixed within ranges of annual patient days. For the upcoming year ending June 30, 20x3, the Department will be able to obtain additional patient days. If that happens, the department will obtain exactly 2.400 additional capacity, in terms of patient days at a cost of $720,000 Additional patient days will be either 0 or 2,400 5. Pediatrics operated at 100 percent capacity on 90 days during the year ended June 30, 20x2 Administrators estimate that on these 90 days, Pediatrics could have filled another 20 beds above capacity. Delaware Medical Center has an additional 20 beds available for rent for the year ending June 30, 20x2. Such additional rental would increase Pediatrics fixed charges by $540,000. Do an incremental analysis to determine the net increase or decrease in Pediatrics earnings from the additional 20 beds if Pediatrics had rented this extra capacity from Delaware Medical Center

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