Melford Hospital Case

Group Case Presented by:

The Melford Hospital is a hospital that has the possibility to increase the number of beds available to patients at the hospital. The Melford Hospital is at a crossroads and needs to decide whether to add 20 more beds to the existing 60 beds s they did in 2002, but will only do so if it is profitable to Melford Hospital. After implementing the Cost-Volume-Profit Analysis (CVP) one can see that in 2002 the Melford Hospital in its current state is profitable totaling $620,000 once the total fixed costs and variable costs are deducted from the hospitals total revenue of $6,000,000. The strategic role for the pediatrics unit at Melford Hospital should be to implement the CVP Analysis using life-cycle costing to determine whether 20 additional beds in 2003 will achieve the desired profit Melford Hospital is hoping for. In using the CVP Analysis, it was determined that the addition of 20 beds to the pediatrics unit in 2003 would increase the total profit of the Melford Hospital to $1,763,380.00; an increase of $1,143,364.00. The CVP Analysis proves that if Melford Hospital decides to add the 20 beds to the pediatrics unit in 2003 as it did previously in 2002, the potential for increase in profit is highly possible; assuming that total revenue and variable costs stay the same.