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Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?

Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ABC-A Service Application 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 it by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi- cantly 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 driv- ers 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: Number of Assistance Contacts 60,000 Resident Classification Annual Assistance Annual Resident Days Hours ABCD A. 8,760 15,000 6,570 20,000 52,000 C. 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. Total cost of meals and residential space. $5,000,000 $3,280,000 Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. c. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
Transcribed Image Text:ABC-A Service Application 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 it by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi- cantly 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 driv- ers 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: Number of Assistance Contacts 60,000 Resident Classification Annual Assistance Annual Resident Days Hours ABCD A. 8,760 15,000 6,570 20,000 52,000 C. 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. Total cost of meals and residential space. $5,000,000 $3,280,000 Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. c. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
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