Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,400,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day ICU 2,000 $ 3,220,000 $ 236 Patient A $5,000 $ 26,250 Other 18,000 $ 14,180,000 $96 14 0 Patient B $ 6,700 $ 37,000 Total Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU Required: 1. Assuming McCullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 21 7 20,000 $ 17,400,000
Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,400,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day ICU 2,000 $ 3,220,000 $ 236 Patient A $5,000 $ 26,250 Other 18,000 $ 14,180,000 $96 14 0 Patient B $ 6,700 $ 37,000 Total Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU Required: 1. Assuming McCullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 21 7 20,000 $ 17,400,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer within the format by providing formula the detailed working
Please provide answer in text (Without image)
Please provide answer in text (Without image)
Please provide answer in text (Without image)
Transcribed Image Text:1. Assuming McCullough continues to use only one predetermined overhead rate, calculate:
a. The predetermined overhead rate.
b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B.
2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate:
a. The ICU and Other overhead rates.
b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B.
Note: Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the
nearest dollar amount.
1a. Predetermined overhead rate
1b. Total cost for patient A
1b. Total cost for patient B
2a. Predetermined ICU overhead rate
2a. Predetermined Other overhead rate
2b. Total cost for patient A
2b. Total cost for patient B
$ 20,160,000.00 per patient-day
$
$
$
$
$
$
Check my work
44,214
63,596
1,842.00 per patient-day
879.78 per patient-day
42,867
68,322
Transcribed Image Text:-3
6
Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient
spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this
predetermined rate was based on three estimates-fixed overhead costs of $17,400,000, variable overhead costs of $110 per patient-
day, and a denominator volume of 20,000 patient-days.
Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the
number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead
costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining
to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below:
Estimated number of patient-days
Estimated fixed overhead cost
Estimated variable overhead cost per patient-day
ICU
2,000
$ 3,220,000
$236
Patient A
$ 5,000
$ 26,250
Other
14
0
18,000
$ 14,180,000
$96
Patient B
$ 6,700
$ 37,000
Direct materials
Direct labor
Total number of patient-days (including ICU)
Number of patient-days spent in ICU
Required:
1. Assuming McCullough continues to use only one predetermined overhead rate, calculate:
a. The predetermined overhead rate.
b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B.
Total
21
7
Check my work
20,000
$ 17,400,000
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