EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
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Textbook Question
Chapter 5, Problem 5.39P
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.
| Professional salaries: | ||
| 4 physicians × $150,000 | $600,000 | |
| 12 psychologists × $75,000 | 900,000 | |
| 16 nurses × $30,000 | 480,000 | $1,980,000 |
| Medical supplies | 242,000 | |
| Rent and clinic maintenance | 138,600 | |
| Administrative costs to manage patient charts, food, laundry | 484,000 | |
| Laboratory services | 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 following data describing employee allocations to individual programs:
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
- 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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Q.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.
General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:
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Variable cost per inpatient day
$19
Charge (revenue) per inpatient day
$105
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Yellville Regional Hospital is a small hospital with two service departments and three revenue areas:
Service Department
Direct Costs
Square Feet
Laundry Pounds
Housekeeping (HK)
$
80,000
-
16,000
Laundry
$
132,000
500
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Revenue Areas:
Surgery
$
400,000
1,500
48,000
Semiprivate rooms
$
200,000
2,000
24,000
Maternity
$
150,000
1,000
12,000
The hospital wants to allocate the service department costs to the revenue areas. Housekeeping is allocated based on square footage; Laundry is allocated based on pounds of laundry. The normal capacity for Surgery is 200 hours per month; normal capacity for semiprivate rooms is 600 patient days; and normal capacity for maternity is 200 patient days.Required:Determine the overhead rate for the three revenue areas. Allocate the service department costs to the revenue…
Chapter 5 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8QCh. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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