RAFFLES PRIVATE HOSPITAL

Raffles Private Hospital

Raffles Private Hospital

Case Study 1: Solution

Data

Average patient fee

1500

No. of patients

900

Direct Labor

400

Drugs and other consumables

150

Other direct cost

300

Hospital Overheads:

Insurance

30000

Rent

40000

Depreciation

30000

Administration

150000

Requirement 1

Variable cost

=

400 + 150 + 300 + 30000 + 40000 + 30000 + 150000

Variable cost

=

250850

The contribution margin is the difference between the selling prices less variable costs. It is also considered as excess revenue over variable costs, excess should cover the fixed costs and profit or gain. In the production process of fixed costs are incurred, variable costs and further expect a markup (Jawahar-Lal, 2009). If the contribution margin is determined by excluding sales of variable costs, then the contribution margin is has to cover fixed costs and the expected profit for the investor (Rajasekaran, 2010). The sale price is composed of two elements that include fixed and variable costs.

Fixed cost is the costs that remain constant over a period of time, regardless of the volume of production. These costs are not affected if the company decides to produce more or less, or choose not to produce (Weygandt, Kimmel and Kieso, 2010). Example of these costs may be the lease of premises or land where the company operates on the $ 1,000,000 paid monthly. The company produces or does not occur. Produce enough or soon, you should always pay monthly $ 1,000,000, making it a fixed cost. Besides it, variable cost is the cost that is modified according to the volume of production that is if there is no production and variable costs if production increases the variable cost is high (Needles and Powers, 2010). Variable costs are a function of the quantities produced. An example of these costs is the raw material, which only consumed by the units produced.

Contribution margin

=

Sales

-

Variable cost

Contribution margin

=

(1500 x 900)

-

250850

Contribution margin

=

1350000

-

250850

Contribution margin

=

1099150

Contribution margin per patient

=

1099150

900

Contribution margin per patient

=

1221.278

Requirement 2

Breakeven point in units 

=

Fixed costs

Contribution margin per patient

Breakeven point in units 

=

765000

1221

Breakeven point in units 

626.393

Requirement 3

If Raffles Private Hospital gets successful with its tender that is providing health care services to extra 400 patients, then in the given case then occupancy rate will remain same in a way that overheads of the hospitals will remain same. Moreover, as it is also expected that extra 400 patients will cost the same to treat as the currently treated patients, for that reason, there will be no extra cost take place for providing services to these patients.

Requirement 4

Breakeven point in units 

=

Fixed costs

Price - Variable cost

Breakeven point in units 

=

1105000

1699150.00

Breakeven point in units 

=

0.650

Requirement 5

Breakeven point in units 

=

Fixed costs

Price - Variable cost

Breakeven point in units 

=

320000

1699150.00

Breakeven point in units 

=

0.188

Requirement 6

Factors Important for Filling Tender

In considering the tender for the government Raffles Private Hospital should consider the factors that are important to take account. In this context, tender documentation is a collection of documents, which contained the conditions of competition and the future contract. When the bidding, Raffles Private Hospital must act strictly according to this documentation. All applicable rules, regulations or procedures shall be applicable only if it is specified in the tender documents. The content of such records is determined by the current ...