Black Forest Clinic contains 340 beds. The average occupancy rate is 85% per month. In other words, an average of 85% of the clinic’s beds are occupied by patients. At this level of occupancy, the clinic’s operating costs are $40 per occupied bed per day, assuming a 30 day month. This $40 cost contains both variable and fixed cost elements.
During November, the clinic’s occupancy rate was only 70%. A total of $339,150 in ioperating cost was incurred during the month.
Required:
1. Using the high low method, estimate:
a. The variable cost per occupied bed on a daily basis.
b. The total fixed operating costs per month.
2. Assume an occupancy rate of 80% per month. What amount of total operating cost would you expect the clinic to incur?
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