ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides it by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi- cantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost driv- ers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountant has gathered the following data for the most recent annual period: Number of Assistance Resident Classification Annual Assistance Annual Resident Days Hours Contacts ABCD A. 8,760 15,000 60,000 6,570 20,000 52,000 C. 4,380 22,500 52,000 2,190 32,500 52,000 21,900 90,000 216,000 Other data: Total cost of medical services for the period. Total cost of meals and residential space. $5,000,000 $3,280,000 Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. c. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides it by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi- cantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost driv- ers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountant has gathered the following data for the most recent annual period: Number of Assistance Resident Classification Annual Assistance Annual Resident Days Hours Contacts ABCD A. 8,760 15,000 60,000 6,570 20,000 52,000 C. 4,380 22,500 52,000 2,190 32,500 52,000 21,900 90,000 216,000 Other data: Total cost of medical services for the period. Total cost of meals and residential space. $5,000,000 $3,280,000 Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. c. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:ABC-A Service Application Grand Haven is a senior living community that offers a full range of
services including independent living, assisted living, and skilled nursing care. The assisted living
division provides residential space, meals, and medical services (MS) to its residents. The current
costing system adds the cost of all of these services (space, meals, and MS) and divides it by total
resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi-
cantly among the residents, Grand Haven's accountant recommended that an ABC system be designed
to calculate more accurately the cost of MS provided to residents. She decided that residents should
be classified into four categories (A, B, C, D) based on the level of services received, with group A
representing the lowest level of service and D representing the highest level of service. Two cost driv-
ers being considered for measuring MS costs are number of assistance calls and number of assistant
contacts. A contact is registered each time an assistance professional provides medical services or aid
to a resident. The accountant has gathered the following data for the most recent annual period:
Number of Assistance
Resident
Classification
Annual Assistance
Annual Resident Days
Hours
Contacts
ABCD
A.
8,760
15,000
60,000
6,570
20,000
52,000
C.
4,380
22,500
52,000
2,190
32,500
52,000
21,900
90,000
216,000
Other data:
Total cost of medical services for the period.
Total cost of meals and residential space.
$5,000,000
$3,280,000
Required (Round Answers and Intermediate Calculations to the Nearest Dollar)
a. Determine the ABC cost of a resident day for each category of residents using assistance hours as
the cost driver.
b. Determine the ABC cost of a resident day for each category of residents using assistance contacts
as the cost driver.
c.
Which cost driver do you think provides the more accurate measure of the cost per day for a
Grand Haven resident?
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