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

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

Name: Q.Using an activity-based costing approach to cost analysis, calculate
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Description: Q.Using an activity-based costing approach to cost analysis, calculate the budgeted cost of each program and the budgeted cost per patient-year of the drug program. Crosstown Health Center runs two programs: drug addict rehabilitation and after-care

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Question

Q.Using an activity-based costing approach to cost analysis, calculate the budgeted cost of each program and the budgeted cost per patient-year of the drug program.

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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