Breakeven analysis and target profit for a hospital Morton Medical Institute operates a 300-bed hospital and offers a number of specialized medical services. Morton’s hospital facility and equipment are leased on a long-term basis. The hospital charges $2,000 per patient day. On the basis of past cost data, Morton has estimated its variable costs as $500 per patient day. Fixed costs are $2,000,000 per month. The hospital’s administrator has estimated that the hospital will average 5,400 patient days per month.

Required

(a) How much will the hospital need to charge per patient day to break even at this level of activity?

(b) Refer to the original data in the problem. How many patient days must Morton average each month to earn a target profit of $45,000 per month?