Determining charges for private pay residents. Shady Grove Nursing Home has 220 private pay residents.

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Determining charges for private pay residents. Shady Grove Nursing Home has 220 private pay 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 $125 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 $45 for supplies, food, and contracted services, and annual fixed
costs are $6,000,000. ‘ What is the daily contribution margin of each non-private pay resident? ‘ If 25 percent of the residents are non-private pay, what will
Shady Rest charge the private pay patients to break even? ‘ What if non-private pay payors cover 50 percent of the residents? ‘ The owner of Shady Rest Home
insists that the facility earn $80,000 in annual profits. How much must the administrator raise the per day charge for the private insured residents if 25 percent
of the residents are covered by non-private pay payors?

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