Conduct a profit (CVP) analysis

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Conduct a profit (CVP) analysis

Assessment #2: Case Study of a health care organization’s profitability 

In this assessment you will use the data provided below and conduct a profit (CVP) analysis. You will be graded based on your understanding of profit (CVP) analysis, the accuracy of your calculations, the validity of you conclusions and your ability to clearly communicate your analysis. To complete this assignment, follow these steps.

  1. Assume the following information about cost and charges for a hospital in 2014:

Fixed Costs = $10,000,000

Variable cost per inpatient Day = $200

Charge Per Inpatient Day = $1,000.

  1. Review Nowicki Chapter 6 and Gapenski Chapter 5. From what you have learned in these chapters estimate the: a) accounting breakeven point quantity and breakeven dollar amount and b) the economic breakeven point quantity and dollar amount. 
  2. Explain the contribution margin.
  3. Write a short paper in the following format:
    1. Cover page with your name, class/section and instructor’s name
    2. For each measure estimated above, in a paragraph: define the measure, explain the importance of that measure to the healthcare services manager. 
    3. Explain how these breakeven points would vary in a capitated and non-capitated environment.  Provide a numerical example in a table to illustrate difference.

You will be graded base on the following rubric:

90-100

80-89

70-79

0 Points

The student demonstrates a thorough understanding of the meaning of the ratios measured and their applicability to the organization being analyzed.

The student demonstrates a reasonable but not complete understanding of the meaning of the ratios chosen and their applicability to the organization being analyzed.

The student demonstrates a limited understanding of the meaning of the ratios chosen and their applicability to the organization being analyzed.

The student does not demonstrate an understanding of the meaning of the ratios or how they can be used to assess the organization’s financial condition.

All of the ratios are calculated accurately

Only 2 of the ratios are calculated accurately

Only 1 of the ratios are calculated accurately

None of the ratios are calculated accurately.

The student draws accurate conclusions for each of the ratios and for the overall financial health of the organization.

The student draws some accurate conclusions for each of the ratios and for the overall financial health of the organization. There are a few mistakes

The student draws few accurate conclusions for each of the ratios and for the overall financial health of the organization. There are several mistakes

The student’s conclusions for each of the ratios are inaccurate and the overall conclusion on the financial health of the organization is not valid.

Writing quality: Writes clearly, concisely, and with few errors. Easy to understand.

Writing quality: Writes with some errors but the paper can be readily understood.

Writing quality: paper includes numerous errors. Requires some effort to understand.

Writing quality: The paper is poorly written and is difficult to understand.