Reference no: EM133109263

Question - St. Mark's Hospital contains 450 beds. The occupancy rate varies between 50% and 90% per month, but the average occupancy rate is generally 80%. In other words, on average, 80% of the hospital's beds are occupied by patients. At this level of occupancy, the hospital's operating costs are $32 per occupied bed per day, assuming a 30-day month. This $32 figure contains both variable and fixed cost elements. This average cost figure drops to $29 when the occupancy rate is 90% (typically during the months of July and August).

During June, the hospital's occupancy rate was only 50% and a total of $326,700 in operating costs was incurred during the month.

Required -

1. Using the high-low method, estimate the total fixed operating costs per month.

2. Assume an occupancy rate of 70% per month. What amount of total operating cost would you expect the hospital to incur?