In: Accounting
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?
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