Question

We Care is an outpatient surgical clinic that was profitable for many years, but Medicare has cut its reimbursements by as much as 50%. As a result, the clinic wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinic’s three cost centers and their cost drivers follow.

  

Cost Center	Cost			Cost Driver	Driver Quantity
Professional salaries	$	2,000,000		Professional hours		9,000
Patient services and supplies		25,000		Number of patients		500
Building cost		150,000		Square feet		1,500

  

The two main surgical units and their related data follow.

Service	Hours	Square Feet*		Patients
General surgery	2,500	600		400
Orthopedic surgery	6,500	900		100

* Orthopedic surgery requires more space for patients, supplies, and equipment.

3.

value:
15.00 points

Required information

Required:

1.	Compute the cost per cost driver for each of the three cost centers. (Round your answers to nearest dollar amount. Omit the "$" sign in your response.)

  

Cost Center	Cost per Driver
Professional salaries	$	per hour
Patient services & supplies	$	per patient
Building cost	$	per sq. ft

References

WorksheetDifficulty: 3 HardLearning Objective: 21-P2 Assign overhead costs using activitybased costing.

Check my work

4.

value:
15.00 points

Required information

2.

Use the results from part 1 to allocate costs from each of the three cost centers to both the general surgery and the orthopedic surgery units. Compute total cost and average cost per patient for both the general surgery and the orthopedic surgery units. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

	Total	Average cost per patient
General surgery	$	$
Orthopedic surgery	$	$

Answer 1