Suppose a hospital unit wants to offer a new service. The service has a fixed cost...

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Suppose a hospital unit wants to offer a new service. Theservice has a fixed cost of $200,000. The service has three DRGs.The number of patients for a specific DRG, their average variablecosts per unit, and their average price per unit are given in thetable below.
No. of Patients
Variable cost Rate $
Price Rate $
DRG1
200
300
450
DRG2
400
1200
1500
DRG3
350
900
1150

Find the break-even volume.
What is the assumption here about the product-mix, goingforward into the future?
At the break-even volume, compute the expected volumes forindividual DRGs.

Answer & Explanation Solved by verified expert

3.8 Ratings (629 Votes)

a First we will calculate product mix Weight of a DRG Percentage of patients with a DRG No of patients with a DRG total patients Total patients Sum of patients all DRGs 200 400 350 950 WE get the following product mix Weight of DRG1 No of patients with DRG1 Total patients 200 950 2105 Weight of DRG2 No of patients with DRG2 Total patients 400 950 4211 See Answer

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Suppose a hospital unit wants to offer a new service. Theservice has a fixed cost of $200,000. The service has three DRGs.The number of patients for a specific DRG, their average variablecosts per unit, and their average price per unit are given in thetable below.No. of PatientsVariable cost Rate $Price Rate $DRG1200300450DRG240012001500DRG33509001150 Find the break-even volume.What is the assumption here about the product-mix, goingforward into the future?At the break-even volume, compute the expected volumes forindividual DRGs.

	No. of Patients	Variable cost Rate $	Price Rate $
DRG1	200	300	450
DRG2	400	1200	1500
DRG3	350	900	1150