# Answered Essay: High-Low Method and Predicting Cost Black Forest Clinic contains 340 beds. The average occupancy ra

High-Low Method and Predicting Cost 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 clinics 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 operating 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?

Solution:

1. a) Calculation of the Variable Cost per Occupied bed on a Daily Basis, by using High-Low Method:

Difference in Cost:

Monthly Operating Costs at 85% Occupancy:

 340 beds * 85% = 289 beds; 289 beds * 30 days * \$40 per bed – day \$346,800 Monthly operating costs at 70% occupancy \$339,150 Difference in Cost \$7,650

Difference in Activity:

 85% occupancy (340 beds * 85% * 30 days) 8,670 70% occupancy (340 beds * 70% * 30 days) 7,140 Difference in Activity 1,530

$\emph{Variable Cost Per Bed} =\frac{\emph{Change in Cost}}{\emph{Change in Activity}}$

$\emph{Variable Cost Per Bed} = \frac{\7,650}{1,530}$

$\emph{Variable Cost Per Bed} = \5$

Therefore, the Variable Cost Per Bed Occupied is \$5.

b) Calculation of the Total Fixed Operating Costs Per Month:

 Monthly operating costs at 85% occupancy \$346,800 Less: Variable Costs 289 beds * 30 days * \$5 per bed – day \$43,350 Fixed Operating Costs Per Month \$303,450

Therefore, the Fixed Operating Costs Per Month is \$303,450.

2) Calculation of the Amount of Total Operating Costs would Expect the Clinic to Incur:

 340 Beds * 80% = 272 beds occupied: Fixed Costs \$303,450 Variable Costs 272 beds * 30 days * \$5 per bed – day \$40,800 Total Expected Operating Costs \$344,250

Therefore, the Amount of Total Operating Costs is \$344,250.

Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

HOW OUR ONLINE ESSAY WRITING SERVICE WORKS

Let us write that nagging essay.

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.

Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.

Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.