Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $175 per day Radiology $247 per image Pharmacy $49 per physician order Chemistry lab $104 per test Operating room $720 per operating room hour The activity usage information associated with the two patients is as follows: Abel Putin Cheryl Umit Number of days 6 days 11 days Number of images 3 images 7 images Number of physician orders 5 orders 7 orders Number of tests 2 tests 5 tests Number of operating room hours 4 hours 7 hours a. Determine the activity cost associated with each patient. Abel Putin $fill in the blank 1 Cheryl Umit $fill in the blank 2
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity-Based Costing for a Service Company
Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:
| Activity | Activity Rate | |
| Room and meals | $175 | per day |
| Radiology | $247 | per image |
| Pharmacy | $49 | per physician order |
| Chemistry lab | $104 | per test |
| Operating room | $720 | per operating room hour |
The activity usage information associated with the two patients is as follows:
| Abel Putin | Cheryl Umit | |||
| Number of days | 6 | days | 11 | days |
| Number of images | 3 | images | 7 | images |
| Number of physician orders | 5 | orders | 7 | orders |
| Number of tests | 2 | tests | 5 | tests |
| Number of operating room hours | 4 | hours | 7 | hours |
a. Determine the activity cost associated with each patient.
| Abel Putin | $fill in the blank 1 |
| Cheryl Umit | $fill in the blank 2 |
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