The CEO of a hospital conducted performance review of all the hospitals departments, including the obstetrics area. As part of this review process, the chief of obstetrics proposed increasing the number of babies being delivered by the department. The CEO examined the department's financial statements from a recent month and noted that for 540 deliveries, costs totaled $3,132,000, while revenue totaled $2,754,000. Pointing out that the hospital was losing $700 per patient, the CEO asked why anyone would want to increase a service that was losing $700 every time the hospital delivered another baby. The chief of obstetrics, however, argued that the CEO's analysis was mistaken and that the department was actually generating over $3,000 per delivery, thus, increasing the number of deliveries would lead to an increase in hospital profit. (5 pts)
a. Do you agree with the chief of obstetrics that the CEO analysis was mistaken? Why? Or Why not?
b. What could be the basis (calculations) that made the chief of obstetrics to claim that the department was actually generating over $3,000 per delivery.