Pareto chart and cost of quality report for a service company The administrator of Liberty Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows: Activities Activity Cost Patient registration $ 6,500 Verifying patient information 9,700 Assigning patients 13,000 Searching/waiting for doctor 9,200 Doctor exam 4,900 Waiting for transport 17,500 Transporting patients 16,200 Verifying lab orders 14,500 Searching for equipment 8,200 Incorrect labs 11,300 Lab tests 17,000 Counting supplies 19,000 Looking for supplies 8,200 Staff training 4,800 Total $160,000 a. b. c. d. Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities. Activity Activity Cost Cost of Quality Classification Value-Added/ Non-Value-Added Classification Patient registration $6,500 Other patient care Value-added Verifying patient information 9,700 Appraisal Value-added Assigning patients 13,000 Other patient care Value-added Searching/waiting for doctor 9,200 Internal failure Non-value-added Doctor exam 4,900 Other patient care Value-added Waiting for transport 17,500 External failure Non-value-added Transporting patients 16,200 Other patient care Value-added Verifying lab orders 14,500 Appraisal Value-added Searching for equipment 8,200 Internal failure Non-value-added Incorrect labs 11,300 External failure Non-value-added Lab tests 17,000 Other patient care Value-added Counting supplies 19,000 Appraisal Value-added Looking for supplies 8,200 Internal failure Non-value-added Staff training 4,800 Prevention Value-added Total $160,000 Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities. Quality Cost Classification Activity Cost Percent of Total Department Cost Prevention $ % Appraisal % Internal failure % External failure % Other patient care % Total $ % Determine the percentages of the total ER costs that are value-added and non-value-added. Activity Cost Percent of Total Department Cost Value-added $ % Non-value-added % Total $ % The ER has % of its total costs as non-value-added. Internal failure and external failure costs represent % of the total
Pareto chart and cost of quality report for a service company
The administrator of Liberty Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:
|
Activities |
Activity Cost |
|
Patient registration |
$ 6,500 |
|
Verifying patient information |
9,700 |
|
Assigning patients |
13,000 |
|
Searching/waiting for doctor |
9,200 |
|
Doctor exam |
4,900 |
|
Waiting for transport |
17,500 |
|
Transporting patients |
16,200 |
|
Verifying lab orders |
14,500 |
|
Searching for equipment |
8,200 |
|
Incorrect labs |
11,300 |
|
Lab tests |
17,000 |
|
Counting supplies |
19,000 |
|
Looking for supplies |
8,200 |
|
Staff training |
4,800 |
|
Total |
$160,000 |
|
a. |
|
b. |
|
c. |
|
d. |
Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities.
|
Activity |
Activity Cost |
Cost of |
Value-Added/ |
|
|
Patient registration |
$6,500 |
Other patient care |
Value-added |
|
|
Verifying patient information |
9,700 |
Appraisal |
Value-added |
|
|
Assigning patients |
13,000 |
Other patient care |
Value-added |
|
|
Searching/waiting for doctor |
9,200 |
Internal failure |
Non-value-added |
|
|
Doctor exam |
4,900 |
Other patient care |
Value-added |
|
|
Waiting for transport |
17,500 |
External failure |
Non-value-added |
|
|
Transporting patients |
16,200 |
Other patient care |
Value-added |
|
|
Verifying lab orders |
14,500 |
Appraisal |
Value-added |
|
|
Searching for equipment |
8,200 |
Internal failure |
Non-value-added |
|
|
Incorrect labs |
11,300 |
External failure |
Non-value-added |
|
|
Lab tests |
17,000 |
Other patient care |
Value-added |
|
|
Counting supplies |
19,000 |
Appraisal |
Value-added |
|
|
Looking for supplies |
8,200 |
Internal failure |
Non-value-added |
|
|
Staff training |
4,800 |
Prevention |
Value-added |
|
|
Total |
$160,000 |
Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities.
|
Quality Cost |
|
Activity Cost |
|
|
Percent of Total |
|
|
|
Prevention |
$ |
% |
|||||
|
Appraisal |
% |
||||||
|
Internal failure |
% |
||||||
|
External failure |
% |
||||||
|
Other patient care |
% |
||||||
|
|
Total |
$ |
% |
||||
Determine the percentages of the total ER costs that are value-added and non-value-added.
|
|
|
Activity Cost |
|
Percent of Total |
|||
|
Value-added |
|
$ |
|
|
% |
||
|
Non-value-added |
|
|
|
% |
|||
|
|
Total |
|
$ |
|
|
% |
|
The ER has % of its total costs as non-value-added. Internal failure and external failure costs represent % of the total
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