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The dietary department at Huntington Hospital has been set up as a profit center. As such, it uses a transfer price to “sell” meals to the clinical departments (such as surgery) for their patients. Its goal is to break even. Information for the past three months of operations is in Exhibit 1.
Assignment
1. Develop a cost equation for the dietary department that can be used to predict total monthly costs.
2. During February, how much would the price per meal need to be for the department to break even?
3. If the department’s price is $10.10 per meal, how many meals must it sell to breakeven.
HUNTINGTON HOSPITAL Exhibit 1. Meal-Related Data
December January February
Number of meals served 3,000 5,000 8,000
Cost of food sold $18,000 $30,000 $48,000 Staff salaries and fringe benefits 14,500 16,500 19,500 Rent and depreciation 4,000 4,000 4,000 Utilities and other 2,100 3,300 5,100 Total $38,600 $53,800 $76,600
In March, the department expects to serve 10,000 meals.
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