Question
In: Accounting
Product Costing and Decision Analysis for a Service Company Pleasant Stay Medical Inc. wishes to determine...
Product Costing and Decision Analysis for a Service Company
Pleasant Stay Medical Inc. wishes to determine its product
costs. Pleasant Stay offers a variety of medical procedures
(operations) that are considered its “products.” The overhead has
been separated into three major activities. The annual estimated
activity costs and activity bases follow:
| Activity | Budgeted Activity Cost | Activity Base |
| Scheduling and admitting | $432,000 | Number of patients |
| Housekeeping | 4,212,000 | Number of patient days |
| Nursing | 5,376,000 | Weighted care unit |
| Total costs | $10,020,000 |
Total “patient days” are determined by multiplying the number of
patients by the average length of stay in the hospital. A weighted
care unit (wcu) is a measure of nursing effort used to care for
patients. There were 192,000 weighted care units estimated for the
year. In addition, Pleasant Stay estimated 6,000 patients and
27,000 patient days for the year. (The average patient is expected
to have a a little more than a four-day stay in the
hospital.)
During a portion of the year, Pleasant Stay collected patient information for three selected procedures, as follows:
| Activity-Base Usage | ||
| Procedure A | ||
| Number of patients | 280 | |
| Average length of stay | x 6 | days |
| Patient days | 1,680 | |
| Weighted care units | 19,200 | |
| Procedure B | ||
| Number of patients | 650 | |
| Average length of stay | x 5 | days |
| Patient days | 3,250 | |
| Weighted care units | 6,000 | |
| Procedure C | ||
| Number of patients | 1,200 | |
| Average length of stay | x 4 | days |
| Patient days | 4,800 | |
| Weighted care units | 24,000 |
Private insurance reimburses the hospital for these activities at a fixed daily rate of $406 per patient day for all three procedures.
Required:
1. Determine the activity rates.
| Activity | Activity Rate | |
| Scheduling and admitting | $ | per patient |
| Housekeeping | $ | per pd |
| Nursing | $ | per wcu |
2. Determine the activity cost for each procedure.
| Activity | Total Activity Cost by Procedure |
| Procedure A | $ |
| Procedure B | $ |
| Procedure C | $ |
3. Determine the excess or deficiency of reimbursements to activity cost.
| Activity | Excess (deficiency) of reimbursement over activity cost |
| Procedure A | $ |
| Procedure B | $ |
| Procedure C | $ |
Hospital management has decided to further investigate the nursing effort. Determine the weighted care units per patient days for each procedure. Round to one decimal place.
Procedure A weighted care units per patient day:
Procedure B weighted care units per patient day:
Procedure C weighted care units per patient day:
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Pleasant Stay Medical Inc. wishes to determine its product costs. Pleasant Stay offers a variety of...
Pleasant Stay Medical
Inc. wishes to determine its product costs. Pleasant Stay offers a
variety of medical procedures (operations) that are considered its
“products.” The overhead has been separated into three major
activities. The annual estimated activity costs and activity bases
follow:
Activity
Budgeted Activity Cost
Activity Base
Scheduling and admitting
$432,000
Number of patients
Housekeeping
4,212,000
Number of patient days
Nursing
5,376,000
Weighted care unit
Total costs
$10,020,000
Total “patient days”
are determined by multiplying the number of patients...
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