Required: 1. Suppose that the costs of daily care are assigned using only patient days as the activity driver (which is also the measure of output). Compute the daily rate using this unit-based approach of cost assignment. 2. Compute activity rates using the given activity drivers (combine activities with the same driver). 3. Compute the charge per patient day for each patient type using the activity rates from Requirement 2 and the demands on each activity.
Objective 2 - Explain why plantwide and departmental
To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:
Activity Cost of activity Activity driver Quantity
Lodging 2.850.000 Patient days 22.500
Monitoring 2.100.000 Monitoring hours use 30.000
Feeding 450.000 Patient days 22.500
Nursing care 4.500.000 Nursing hours 225.000
Total 9.900.000
The demands associated with patient severity are also provided:
Severity Patient days Monitoring hours Nursing hours
High 7.500 15.000 135.000
Medium 11.250 12.000 75.000
Low 3.750 3.000 15.000
Required:
1. Suppose that the costs of daily care are assigned using only patient days as
the activity driver (which is also the measure of output). Compute the daily
rate using this unit-based approach of cost assignment.
2. Compute activity rates using the given activity drivers (combine activities with
the same driver).
3. Compute the charge per patient day for each patient type using the activity
rates from Requirement 2 and the demands on each activity.
4. Suppose that the product is defined as “stay and treatment” where the
treatment is bypass surgery. What additional information would you need to
cost out this newly defined product?
5. Comment on the value of activity-based costing in service industries.
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