EXERCISE 5-7 (20 MINUTES)

1. a. Difference in cost: Monthly operating costs at 80% occupancy: 450 beds × 80% = 360 beds; 360 beds × 30 days × $32 per bed-day ... $345,600Monthly operating costs at 60% occupancy (given) ... 326,700Difference in cost... $ 18,900Difference in activity: 80% occupancy (450 beds × 80% × 30 days)... 10,80060% occupancy (450 beds × 60% × 30 days)... 8,100Difference in activity ... 2,700Change in cost = =$7 $18,900 per bed-day.Change in activity 2,700 bed-days b. Monthly operating costs at 80% occupancy (above) ... $345,600Less variable costs: 360 beds × 30 days × $7 per bed-day ... 75,600Fixed operating costs per month ... $270,000