Crosstown Health Center runs two programs: drug addict rehabilitation and after- care (counseling and support of patients after release from a mental hospital). The center's budget for 2017 follows. Professional salaries: 4 physicians x $150,000 12 psychologists x $75,000 16 nurses x $30,000 Medical supplies $600,000 900,000 480,000 $1,980,000 242,000 Rent and clinic maintenance 138,600 Administrative costs to manage patient charts, food, laundry Laboratory services Total 484,000 92,400 $2,937,000 Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiles the follow- ing data describing employee allocations to individual programs: Total Employees Drug Aftercare Physicians Psychologists 12 Nurses 10 16 Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted information for 2017: Drug Total Aftercare Square feet of space occupied by each program Patient-years of service Number of laboratory tests 9,000 12,000 21,000 50 60 110 700 1,400 2,100

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Q.What benefits can Crosstown Health Center obtain by implementing the ABC system?

Crosstown Health Center runs two programs: drug addict rehabilitation and after-
care (counseling and support of patients after release from a mental hospital). The center's budget for 2017
follows.
Professional salaries:
4 physicians x $150,000
12 psychologists x $75,000
16 nurses x $30,000
Medical supplies
$600,000
900,000
480,000
$1,980,000
242,000
Rent and clinic maintenance
138,600
Administrative costs to manage patient charts, food, laundry
Laboratory services
Total
484,000
92,400
$2,937,000
Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiles the follow-
ing data describing employee allocations to individual programs:
Total Employees
Drug
Aftercare
Physicians
Psychologists
12
Nurses
10
16
Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks
her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted
information for 2017:
Drug
Total
Aftercare
Square feet of space occupied by each program
Patient-years of service
Number of laboratory tests
9,000
12,000
21,000
50
60
110
700
1,400
2,100
Transcribed Image Text:Crosstown Health Center runs two programs: drug addict rehabilitation and after- care (counseling and support of patients after release from a mental hospital). The center's budget for 2017 follows. Professional salaries: 4 physicians x $150,000 12 psychologists x $75,000 16 nurses x $30,000 Medical supplies $600,000 900,000 480,000 $1,980,000 242,000 Rent and clinic maintenance 138,600 Administrative costs to manage patient charts, food, laundry Laboratory services Total 484,000 92,400 $2,937,000 Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiles the follow- ing data describing employee allocations to individual programs: Total Employees Drug Aftercare Physicians Psychologists 12 Nurses 10 16 Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted information for 2017: Drug Total Aftercare Square feet of space occupied by each program Patient-years of service Number of laboratory tests 9,000 12,000 21,000 50 60 110 700 1,400 2,100
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