Professional salaries: $600,000 4 physicians x S150,000 12 psychologists × $75,000 900,000 16 nurses x $30,000 480,000 S1,980,000 Medical supplies Rent and clinic maintenance 242,000 138,600 Administrative costs to manage patient charts, food, laundry Laboratory services 484,000 92,400 Total $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: Drug Aftercare Total Employees Physicians Psychologists 4 4 4 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 Aftercare Total 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 1,400 700 2,100 1. a. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for medical supplies; rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services. Required b. 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. c. What benefits can Crosstown Health Center obtain by implementing the ABC system? 2. What factors, other than cost, do you think Crosstown Health Center should consider in allocating resources to its programs?
Professional salaries: $600,000 4 physicians x S150,000 12 psychologists × $75,000 900,000 16 nurses x $30,000 480,000 S1,980,000 Medical supplies Rent and clinic maintenance 242,000 138,600 Administrative costs to manage patient charts, food, laundry Laboratory services 484,000 92,400 Total $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: Drug Aftercare Total Employees Physicians Psychologists 4 4 4 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 Aftercare Total 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 1,400 700 2,100 1. a. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for medical supplies; rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services. Required b. 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. c. What benefits can Crosstown Health Center obtain by implementing the ABC system? 2. What factors, other than cost, do you think Crosstown Health Center should consider in allocating resources to its programs?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
ABC, health care. Crosstown Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center’s budget for 2017 follows.
Transcribed Image Text:Professional salaries:
$600,000
4 physicians x S150,000
12 psychologists × $75,000
900,000
16 nurses x $30,000
480,000
S1,980,000
Medical supplies
Rent and clinic maintenance
242,000
138,600
Administrative costs to manage patient charts, food, laundry
Laboratory services
484,000
92,400
Total
$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:
Drug
Aftercare
Total Employees
Physicians
Psychologists
4
4
4
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
Aftercare
Total
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
1,400
700
2,100
1. a. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect
costs to programs, calculate the budgeted indirect cost rates for medical supplies; rent and
clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory
services.
Required
b. 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.
c. What benefits can Crosstown Health Center obtain by implementing the ABC system?
2. What factors, other than cost, do you think Crosstown Health Center should consider in allocating
resources to its programs?
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