Question

Assume that you are the chief accountant for a large hospital in Philadelphia. You believe that an Activity Based Costing system would be better in assigning costs to the various departments in the hospital, You want to implement the ABC system on 1/1/21. For the year 2021 you will run the ABC system parallel with your old overhead system.

Assume that the hospital has five main departments: Radiology, Medical, Surgical, Oncology and Neonatal Care.

You will not find this in your book, so do a little research, be creative, and come up with a list of Activity Cost Pools & Cost Drivers for each department. No dollar amounts are to be considered for this forum. For example, the Surgical Department might have General Surgery, Cardiovascular Surgery and Oncology Surgery as their Activity Cost Pools. The cost drivers might be Pre-Admission Testing Requirements, Number of Surgeries, Staff Required per Surgery & Post Anesthesia Care Unit (PACU).

Provide a list of Activity Cost Pools and Activity Cost Drivers for the other four departments.

Answer 1

List of Activity Cost Pools and Activity Cost Drivers in a large hospital -

Departments	Activity Cost Pools	Activity Cost Drivers
Surgical	General Surgery, Cardiovascular Surgery, and Oncology Surgery	Pre-Admission Testing Requirements, Number of Surgeries, Staff Required per Surgery & Post Anesthesia Care Unit (PACU).
Radiology	Reception of patients, Administration of tests, Dictation, Reading Room setup, Patient education	Patients calling or checking in to the hospital for radiology, diagnostic tests, Staff Required per test.
Medical	Consultation with physician, Nurse visits, monitoring of patients, Dispensation of medication.	Medication orders called in, Visit of patients, Staff Required per therapy.
Oncology	Medical observations, surgery, Provision of therapy, and radiation.	Time spent by Nurse, Staff Required per therapy, minutes spent by Scrub Tech.
Neonatal Care	Admission of patients, Patient Prep, Dispensation of medication, Provision of the meal and in-patient facilities, and test results.	Sick receives in a neonatal unit, Testing Requirements, Time spent by baby care staff.

Thanks & all the best............