Which DRG must be promoted in an advertising program if the office has excess capacity?
The Beach Street office of Getwell Clinics specializes in the
treatment of three types of patients: DRG M, DRG J, and DRG P. The
operating statistics for patient care of these three DRGs for last
year are shown below. They include patient volume proportions,
average charges, average variable costs, and the amount of specific
fixed costs assignable to each DRG. In addition, the satellite
office had joint fixed costs last year of $240,000.
Getwell Clinics Operating Statistics
DRG Proportion Charge Variable Cost Fixed Cost
M 50%
$1,700 $1,000 $500,000
J
30%
2,600 1,200
280,000
P
20%
900
600 110,000
Joint Fixed Costs
830,000
Which DRG must be promoted in an advertising program if the office
has excess capacity?
Which DRG must be promoted if the office is almost at maximum
capacity in terms of available hours? Explain why.
Calculate breakeven point for each DRG
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