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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 by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly 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 drivers 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: Resident Classification Annual Resident Days Annual Assistance Hours Number of Assistance Contacts A 8,760 15,000 60,000 6,570 20,000 52,000 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 $3,000,000 Total cost of meals and residential space $2,142,500

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 by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly 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 drivers 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: Resident Classification Annual Resident Days Annual Assistance Hours Number of Assistance Contacts A 8,760 15,000 60,000 6,570 20,000 52,000 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 $3,000,000 Total cost of meals and residential space $2,142,500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Activity-Based Costing (ABC) Calculation for Resident Day Costs #### a. Using Assistance Hours as the Cost Driver **Task:** Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. **Instructions:** - **Round answer below to the nearest dollar.** ##### Formula: Medical services cost per assistance hour: $ _______ **Table for Calculation:** | | **Per Day Costs** | | | |------|----------------|------|--------------| | | **Medical Services** | **Meals and Residential** | **Total** | | **Class A** | $ _______ | $ _______ | $ _______ | | **Class B** | $ _______ | $ _______ | $ _______ | | **Class C** | $ _______ | $ _______ | $ _______ | | **Class D** | $ _______ | $ _______ | $ _______ | (Highlighted cell) **Note:** Use your rounded answer above to compute answers below. Round final answers to the nearest dollar. --- #### b. Using Assistance Contacts as the Cost Driver **Task:** Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. **Instructions:** - **Round answer below to the nearest dollar.** ##### Formula: Medical services cost per assistance contact: $ _______ **Table for Calculation:** | | **Per Day Costs** | | | |------|----------------|------|--------------| | | **Medical Services** | **Meals and Residential** | **Total** | | **Class A** | $ _______ | $ _______ | $ _______ | | **Class B** | $ _______ | $ _______ | $ _______ | | **Class C** | $ _______ | $ _______ | $ _______ | | **Class D** | $ _______ | $ _______ | $ _______ | **Note:** Use your rounded answer above to compute answers below. Round final answers to the nearest dollar. --- ### Explanation: This educational content guides you through the process of calculating the Activity-Based Costing (ABC) for resident day costs using two different cost drivers: assistance hours and assistance contacts. The tables provided should be filled in with the appropriate costs per resident class and the calculations rounded to the nearest dollar.
Transcribed Image Text:### Activity-Based Costing (ABC) Calculation for Resident Day Costs #### a. Using Assistance Hours as the Cost Driver **Task:** Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. **Instructions:** - **Round answer below to the nearest dollar.** ##### Formula: Medical services cost per assistance hour: $ _______ **Table for Calculation:** | | **Per Day Costs** | | | |------|----------------|------|--------------| | | **Medical Services** | **Meals and Residential** | **Total** | | **Class A** | $ _______ | $ _______ | $ _______ | | **Class B** | $ _______ | $ _______ | $ _______ | | **Class C** | $ _______ | $ _______ | $ _______ | | **Class D** | $ _______ | $ _______ | $ _______ | (Highlighted cell) **Note:** Use your rounded answer above to compute answers below. Round final answers to the nearest dollar. --- #### b. Using Assistance Contacts as the Cost Driver **Task:** Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. **Instructions:** - **Round answer below to the nearest dollar.** ##### Formula: Medical services cost per assistance contact: $ _______ **Table for Calculation:** | | **Per Day Costs** | | | |------|----------------|------|--------------| | | **Medical Services** | **Meals and Residential** | **Total** | | **Class A** | $ _______ | $ _______ | $ _______ | | **Class B** | $ _______ | $ _______ | $ _______ | | **Class C** | $ _______ | $ _______ | $ _______ | | **Class D** | $ _______ | $ _______ | $ _______ | **Note:** Use your rounded answer above to compute answers below. Round final answers to the nearest dollar. --- ### Explanation: This educational content guides you through the process of calculating the Activity-Based Costing (ABC) for resident day costs using two different cost drivers: assistance hours and assistance contacts. The tables provided should be filled in with the appropriate costs per resident class and the calculations rounded to the nearest dollar.
### ABC-A Service Application **Introduction:** Grand Haven is a senior living community offering a full spectrum of services such as independent living, assisted living, and skilled nursing care. The assisted living division provides residents with residential space, meals, and medical services (MS). **Current Costing System:** - It combines the costs of these services (space, meals, and MS) and divides by total resident days to derive a monthly per-resident day cost. **Challenges:** - The cost of medical services (MS) varies significantly among residents. **Proposed Solution:** - The accountant recommended an Activity-Based Costing (ABC) system to better calculate MS costs. - Residents are categorized into four classes (A, B, C, D) based on service levels, with A being the lowest and D the highest. **Cost Drivers:** - Number of assistance calls - Number of assistance contacts **Data Collection:** For the most recent annual period, the accountant has gathered data in the table below: | **Resident Classification** | **Annual Resident Days** | **Annual Assistance Hours** | **Number of Assistance Contacts** | |-----------------------------|--------------------------|-----------------------------|----------------------------------| | A | 8,760 | 15,000 | 60,000 | | B | 6,570 | 20,000 | 52,000 | | C | 4,380 | 22,500 | 52,000 | | D | 2,190 | 32,500 | 52,000 | | **Total** | **21,900** | **90,000** | **216,000** | **Additional Data:** | **Other Data:** | | |---------------------------------------------|--------------------------------------| | Total cost of medical services for the period | $3,000,000 | | Total cost of meals and residential space | $2,142,500 | **Analysis:** - The table lists annual resident days, annual assistance hours, and the number of assistance contacts for each resident classification. - This data will be used in the ABC system to allocate MS costs more accurately based on the level of services provided to each resident classification. ##### Conclusion: Implementing an Activity-Based Costing system will enhance the accuracy of MS cost calculations, ensuring each resident's MS costs reflect
Transcribed Image Text:### ABC-A Service Application **Introduction:** Grand Haven is a senior living community offering a full spectrum of services such as independent living, assisted living, and skilled nursing care. The assisted living division provides residents with residential space, meals, and medical services (MS). **Current Costing System:** - It combines the costs of these services (space, meals, and MS) and divides by total resident days to derive a monthly per-resident day cost. **Challenges:** - The cost of medical services (MS) varies significantly among residents. **Proposed Solution:** - The accountant recommended an Activity-Based Costing (ABC) system to better calculate MS costs. - Residents are categorized into four classes (A, B, C, D) based on service levels, with A being the lowest and D the highest. **Cost Drivers:** - Number of assistance calls - Number of assistance contacts **Data Collection:** For the most recent annual period, the accountant has gathered data in the table below: | **Resident Classification** | **Annual Resident Days** | **Annual Assistance Hours** | **Number of Assistance Contacts** | |-----------------------------|--------------------------|-----------------------------|----------------------------------| | A | 8,760 | 15,000 | 60,000 | | B | 6,570 | 20,000 | 52,000 | | C | 4,380 | 22,500 | 52,000 | | D | 2,190 | 32,500 | 52,000 | | **Total** | **21,900** | **90,000** | **216,000** | **Additional Data:** | **Other Data:** | | |---------------------------------------------|--------------------------------------| | Total cost of medical services for the period | $3,000,000 | | Total cost of meals and residential space | $2,142,500 | **Analysis:** - The table lists annual resident days, annual assistance hours, and the number of assistance contacts for each resident classification. - This data will be used in the ABC system to allocate MS costs more accurately based on the level of services provided to each resident classification. ##### Conclusion: Implementing an Activity-Based Costing system will enhance the accuracy of MS cost calculations, ensuring each resident's MS costs reflect
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