Step bys Step ABC-A Service Application Grand Haven is a senior living community that offers a full range ofservices including independent living, assisted living, and skilled nursing care. The assisted livingdivision provides residential space, meals, and medical services (MS) to its residents. The currentcosting system adds the cost of all of these services (space, meals, and MS) and divides it by totalresident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi-cantly among the residents, Grand Haven's accountant recommended that an ABC system be designedto calculate more accurately the cost of MS provided to residents. She decided that residents shouldbe classified into four categories (A, B, C, D) based on the level of services received, with group Arepresenting the lowest level of service and D representing the highest level of service. Two cost driv-ers being considered for measuring MS costs are number of assistance calls and number of assistantcontacts. A contact is registered each time an assistance professional provides medical services or aidto a resident. The accountant has gathered the following data for the most recent annual period:Number of AssistanceContacts60,000ResidentClassificationAnnual AssistanceAnnual Resident DaysHoursABCDA.8,76015,0006,57020,00052,000C.4,38022,50052,0002,19032,50052,00021,90090,000216,000Other data:Total cost of medical services for the period.Total cost of meals and residential space.$5,000,000$3,280,000Required (Round Answers and Intermediate Calculations to the Nearest Dollar)a. Determine the ABC cost of a resident day for each category of residents using assistance hours asthe cost driver.b. Determine the ABC cost of a resident day for each category of residents using assistance contactsas the cost driver.c.Which cost driver do you think provides the more accurate measure of the cost per day for aGrand Haven resident?

In ABC costing method, the costs are allocated on the basis of the activities used as cost…

Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?

Required (Round Answers and Intermediate Calculations to the Nearest Dollar) a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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