Coastal Health Clinic uses a job-order costing system to track charges for each patient. The following charges relate to James Rivera, who underwent a hernia repair surgery: Category Pharmacy Charges $200 Sterile Supplies Other Supplies $1,500 $3,500 Operating Room Services $5,000 Anaesthesia Anaesthesiologist $1,200 $2,800 Coastal charges patients for the use of the operating room based on a predetermined overhead rate. The estimated overhead costs of the operating room are $6,000,000, and the activity base is 3,000 available hours. a. Calculate the predetermined overhead rate for the operating room and determine the charge to James. Assume that his surgery took 2 hours in the operating room. b. Calculate the total cost for the hernia repair surgery.

Coastal Health Clinic uses a job-order costing system to track charges for each patient. The following charges relate to James Rivera, who underwent a hernia repair surgery: Category Pharmacy Charges $200 Sterile Supplies Other Supplies $1,500 $3,500 Operating Room Services $5,000 Anaesthesia Anaesthesiologist $1,200 $2,800 Coastal charges patients for the use of the operating room based on a predetermined overhead rate. The estimated overhead costs of the operating room are $6,000,000, and the activity base is 3,000 available hours. a. Calculate the predetermined overhead rate for the operating room and determine the charge to James. Assume that his surgery took 2 hours in the operating room. b. Calculate the total cost for the hernia repair surgery.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter5: Product And Service Costing: Job-order System

Section: Chapter Questions

Problem 33P: Dr. Alyx Hemmings is employed by Mesa Dental. Mesa Dental recently installed a computerized...

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Claims Management Inc. provides claims processing services to several large health insurance providers. Customers who are covered by health insurance provided by one of Claims Management's partners submit their claims for health and dental services along with related documentation, and the employees at Claims Management compare their claims to the details of their benefit plans and calculate the value of the benefits owed. The company uses a predetermined variable overhead rate based on direct labour-hours. In the month of September, 15,000 claims were processed using 4,500 direct labour-hours. The company incurred a total of $4,950 in variable overhead costs. According to the company's standards, 0.25 direct labour-hours are required to process a claim, and the variable overhead rate is $1.20 per direct labour-hour. Required. 1-a. What variable overhead cost should have been incurred to process the 15,000 claims? Standard variable overhead cost 1-b. How much does this differ from the…
Dr. Alyx Hemmings is employed by Mesa Dental. Mesa Dental recently installed a computerized job-order costing system to help monitor the cost of its services. Each patient is assigned a job number when he or she checks in with the receptionist. The receptionist-bookkeeper notes the time the patient enters the treatment area and when the patient leaves the area. This differ-ence between the entry and exit times is the number of patient hours used and the direct labor time assigned to the dental assistant. (A dental assistant is constantly with the patient.) Thedirect labor time assigned to the dentist is 50 percent of the patient hours. (The dentist typically splits her time between two patients.) The chart filled out by the dental assistant provides additional data that is entered into the computer. For example, the chart contains service codes that identify the nature of the treat-ment, such as whether the patient received a crown, a filling, or a root canal. The chart not only…
Dr. Alyx Hemmings is employed by Mesa Dental. Mesa Dental recently installed a computerized job-order costing system to help monitor the cost of its services. Each patient is assigned a job number when he or she checks in with the receptionist. The receptionist-bookkeeper notes the time the patient enters the treatment area and when the patient leaves the area. This difference between the entry and exit times is the number of patient hours used and the direct labor time assigned to the dental assistant. (A dental assistant is constantly with the patient.) The direct labor time assigned to the dentist is 50 percent of the patient hours. (The dentist typically splits her time between two patients.) The chart filled out by the dental assistant provides additional data that is entered into the computer. For example, the chart contains service codes that identify the nature of the treatment, such as whether the patient received a crown, a filling, or a root canal. The chart not only identifies the type of service but its level as well. For example, if a patient receives a filling, the dental assistant indicates (by a service-level code) whether the filling was one, two, three, or four surfaces. The service and service-level codes are used to determine the rate to be charged to the patient. The costs of providing different services and their levels also vary. Costs assignable to a patient consist of materials, labor, and overhead. The types of materials usedand the quantityare identified by the assistant and entered into the computer by the bookkeeper. Material prices are kept on file and accessed to provide the necessary cost information. Overhead is applied on the basis of patient hours. The rate used by Mesa Dental is 32 per patient hour. Direct labor cost is also computed using patient hours and the wage rates of the direct laborers. Dr. Hemmings is paid an average of 60 per hour for her services. Dental assistants are paid an average of 20 per hour. Given the treatment time, the software program calculates and assigns the labor cost for the dentist and her assistant; overhead cost is also assigned using the treatment time and the overhead rate. The overhead rate does not include a charge for any X-rays. The X-Ray Department is separate from dental services; X-rays are billed and costed separately. The cost of an X-ray is 12 per film; the patient is charged 15 per film. If cleaning services are required, cleaning labor costs 35 per patient hour. Glen Johnson, a patient (Job 267), spent 30 minutes in the treatment area and had a two-surface filling. He received two Novocaine shots and used three ampules of amalgam. The cost of the shots was 14 (7 each). The cost of the amalgam was 6 per ampule. Other direct materials used are insignificant in amount and are included in the overhead rate. The rate charged to the patient for a two-surface filling is 110. One X-ray was taken. Required: 1. Prepare a job-order cost sheet for Glen Johnson. What is the cost for providing a two-surface filling? What is the gross profit earned? Is the X-ray a direct cost of the service? Why are the X-rays costed separately from the overhead cost assignment? 2. Suppose that the patient time and associated patient charges are given for the following fillings: Compute the cost for each filling and the gross profit for each type of filling. Assume that the cost of Novocaine is 14 for all fillings. Ampules of amalgam start at two and increase by one for each additional surface. Assume also that only one X-ray film is needed for all four cases. Does the increase in billing rate appear to be fair to the patient? Is it fair to the dental corporation?
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