Determining charges for private pay residents. Shady Grove Nursing Home has 250 residents. The administrator is concerned about balancing the ratio of its private pay to non-private pay patients....

Determining charges for private pay residents. Shady Grove Nursing Home has 250 residents. The administrator is concerned about balancing the ratio of its private pay to non-private pay patients. Non-private pay sources reimburse an average of $155 per day whereas private pay residents pay on average 90 percent of full daily charges. The administrator estimates that variable cost per resident per day is $80 for supplies, food, and contracted services, and annual fixed costs are $10 million.

a. What is the daily contribution margin of each non-private pay resident?

b. If 25 percent of the residents are non-private pay, what will Shady Grove charge the private pay patients to break even?

c. What if non-private pay payors cover 50 percent of the residents?

d. The owner of Shady Grove Nursing Home insists that the facility earn $1 million in annual profits. How much must the administrator raise the per day charge for the privately insured residents if 25 percent of the residents are covered by non-private pay payors?