Essentials Of Cost Accounting For Health Care Organizations 3rd Edition by Steven Finkler, David Ward,Judith Baker

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Finkler Residential Treatment Facility anticipates that it will have 25,000 patient days next year. This is substantially below its capacity of 35,000 patient-days per year. The facility has variable costs of $75 per patient-day. Its fixed costs are $1,500,000 per year.
a) Calculate the average cost per patient day for Finkler Residential Treatment Facility at a volume of 25,000 patientdays and at 30,000 patient-days.
b) Assume that an HMO offers to generate 5,000 patient-days per year. It currently sends no patients to Finkler Residential Treatment Facility. It is willing to pay a maximum flat amount of $90 per patient-day. Assuming that its case mix is similar to the current 25,000 patient-days, should Finkler accept its business?