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Activity-based costing for a service company Crosswinds Hospital plans to use activity-based costing to assign hospital...

Activity-based costing for a service company

Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:

Activity Activity Rate
Room and meals $260 per day
Radiology $210 per image
Pharmacy $30 per physician order
Chemistry lab $110 per test
Operating room $940 per operating room hour

The activity usage information associated with the two patients is as follows:

Abel Putin Cheryl Umit
Number of days 8 days 4 days
Number of images 6 images 5 images
Number of physician orders 6 orders 2 orders
Number of tests 7 tests 4 tests
Number of operating room hours 5 hours 3 hours

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

  1. Determine the activity cost associated with each patient.

    Abel Putin $
    Cheryl Umit $

  2. Why is the total activity cost different for the two patients?

      apparently had a different condition that required more extensive treatment. Thus, the activity cost to   is more than the activity cost of the other patient.

Solutions

Expert Solution

Activity Based Costing
Answer
1 Activity Cost Associated with
Activity Activity Driver Rate (A) Abel Putin ($) Cheril Umit ($)
(a) Cost (A*a) (b) Cost (A*b)
Room and Maeals Per day 260 8 2080 4 1040
Radiology Per Image 210 6 1260 5 1050
Pharmacy Per physician Order 30 6 180 2 60
Chemistry Lab Per Tests 110 7 770 4 440
Operating Room Per operating room Hour 940 5 4700 3 2820
Total Allocated Cost as per Activity based costing 8990 5410
2 Why Cost is different for both patients.?
Cost drivers for each patients are different so that, the total cost will be different

ekkarill92 answered 2 years ago
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