Question

In: Accounting

Problem 1: Sedgwick County Hospital uses an indirect job-costing system for all patients. In June, the...

Problem 1: Sedgwick County Hospital uses an indirect job-costing system for all patients. In June, the budgeted nursing care charges for each department and budgeted allocation bases of nursing days are as follows:

Critical care Special Care General Care

Budgeted nursing cost $2,480,000 $1,644,000 $1,280,400

Budgeted nursing days 5,000 4,000 8,000

Patient Ms. Graves spent six days in critical care and eight days in special care during June. The remainder of the 30-day month was spent in the general care area.

Required:

a. Determine the budgeted overhead rate for each department.

b. What are the total charges to Ms. Graves if she was in the facility the entire month?

Problem 2:

Cowley County Hospital uses a job-costing system for all patients who have surgery. In March, the pre-operating room (PRE-OP) and operating room (OR) had budgeted allocation bases of 4,000 nursing hours and 2,000 nursing hours, respectively. The budgeted nursing overhead charges for each department for the month were $168,000 and $132,000, respectively. The hospital floor for surgery patients had budgeted overhead costs of $1,200,000 and 15,000 nursing hours for the month. For patient Fred Adams, actual hours incurred were eight and four hours, respectively, in the PRE-OP and OR rooms. He was in the hospital for 4 days (96 hours). Other costs related to Adams were:$168,000 and $132,000, respectively. The hospital floor for surgery patients had budgeted overhead costs of $1,200,000 and 15,000 nursing hours for the month. For patient Fred Adams, actual hours incurred were eight and four hours, respectively, in the PRE-OP and OR rooms. He was in the hospital for 4 days (96 hours). Other costs related to Adams were:             

PRE-OP Costs OR Costs In-room Costs

Patient medicine $200 $500 $2,400

Direct nursing time $1,000 $2,000 $3,000

The hospital uses a budgeted overhead rate for applying overhead to patient stays.

Required:

a. What is the total cost of the stay of patient Fred Adams?

Solutions

Expert Solution

1.a.

Particulars Critical Care Special Care General Care
Budgeted Nursing Cost $ 2,480,000 $ 1,644,000 $ 1,280,400
Budgeted Nursing Days 5,000 4,000 8,000
Overhead Rate per day = (Budgeted Nursing Cost / Budgeted nursing days)

= $ 2,480,000/5,000

= $ 496

= $ 1,644,000/4,000

= $ 411

= $ 1,280,400/8,000

=$ 160.05

b.  Total charges to Ms. Graves if she was in the facility the entire month

Department Days Overhead Rate / day Total Charges
Critical Care 6 $ 496 $ 2,976
Special Care 8 $ 411 $ 3,288
General Care

(30 - 6 - 8 )

=16

$ 160.05 $ 2,560.80

2.

Budgeted nursing overhead/ hr calculation :

PRE - OP = $ 168,000/4,000 = $ 42

OR = $ 132,000/ 2,000 = $ 66

Total nursing overhead calculation:

PRE - OP = $ 42 * 8 = $ 336

OR = $ 66 * 4 = $ 264

Calculation of total In room overheads :

In room overhead/ hour = $ 1,200,000/ 15,000 = $ 80

Total no hrs in hospital = 96

Total I room overheads = $ 80 * 96 = $ 7,680

Patient medicine cost = $ 3,100

Nursing time charges = $ 6,000

Total cost of the stay of patient Fred Adams = $ 336 + $ 264 + $ 7,680 + $ 3,100 + $ 6,000 = $ 17,380


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