Financial & Managerial Accounting
14th Edition
ISBN: 9781337515498
Author: WARREN
Publisher: Cengage
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Textbook Question
Chapter 15, Problem 15.3APR
Cost classifications for a service company
A partial list of Foothills Medical Center’s costs follows:
- A. Cost of patient meals
- B. Nurses' salaries
- C.
Depreciation of X-ray equipment - D. Utility costs of the hospital
- E. Salary of intensive care personnel
- F. Cost of X-ray test
- G. Operating room supplies used on patients (catheters, sutures, etc.)
- H. Salary of the nutritionist
- I. General maintenance of the hospital
- J. Cost of new heart wing
- K. Cost of drugs used for patients
- L. Cost of advertising hospital services on television
- M. Cost of improvements on the employee parking lot
- N. Cost of intravenous solutions used for patients
- O. Training costs for nurses
- P. Cost of laundry services for operating room personnel
- Q. Doctor's fee
- R. Overtime incurred in the Patient Records Department due to a computer failure
- S. Cost of blood tests
- T. Cost of maintaining the staff and visitors' cafeteria
- U. Depreciation on patient rooms
Instructions
- 1. What would be Foothills Medical Center's most logical definition for the final cost object?
- 2. Identify whether each of the costs is to be classified as direct or indirect. For purposes of classifying each cost as direct or indirect, use the patient as the cost object.
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partial list of Foothills Medical Center’s costs follows:a. Cost of laundry services for operating room personnelb. Salary of intensive care personnelc. Depreciation on patient roomsd. Cost of blood testse. Nurses’ salariesf. Cost of patient mealsg. Overtime incurred in the Patient Records Department due to a computerfailureh. Operating room supplies used on patients (catheters, sutures, etc.)i. Doctor’s feej. Cost of X-ray testk. Cost of maintaining the staff and visitors’ cafeterial. Cost of drugs used for patientsm. Cost of intravenous solutions used for patientsn. Cost of improvements on the employee parking loto. Salary of the nutritionistp. General maintenance of the hospitalq. Cost of advertising hospital services on televisionr. Cost of new heart wings. Training costs for nursest. Depreciation of X-ray equipmentu. Utility costs of the hospital
Instructions1. What would be Foothills Medical Center’s most logical definition for the final cost object? Explain.2. Identify whether…
Standard costs are divided into which of the following components?
A. price standard and quantity standard
B. quality standard and quantity standard
C. variance standard and quantity standard
D. materials standard and labor standard
Which of the following activity bases would be the most appropriate for food costs of a hospital?
A. how many MRI's are taken
B. number of patients who stay in the hospital
C. quantity of prescriptions filled
D. number of nurses scheduled to work
To calculate income from operations, total service department charges are
A. subtracted from operating expenses
B. subtracted from income from operations before service department charges
C. subtracted from gross profit margin
D. added to income from operations before service department charges
Projected Revenues by Patient Services Department
Routine Care
Laboratory
Radiology
Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost
driver for general administration and financial services is patient services revenue, while the
cost driver for facilities is space utilization.
a. What are the appropriate allocation rates?
b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the
patient services departments.
Total revenues
Projected Costs for All Departments
Patient Services Departments (Direct Costs):
Routine Care
Laboratory
Radiology
Total costs
Support Services Departments (Overhead Costs):
Financial Services
Facilities
Housekeeping
General Administration
Human Resources
Total overhead costs
Total costs of both patient and support services
Projected profit
EXHIBIT 6.7
Kensington Hospital: Final Allocations
Support Department
(allocation rate)
Financial Services ($0.05556)
Facilities
Housekeeping…
Chapter 15 Solutions
Financial & Managerial Accounting
Ch. 15 - What are the major differentes between managerial...Ch. 15 - A. Differentiate between a department with line...Ch. 15 - What manufacturing cost term is used to describe...Ch. 15 - Prob. 4DQCh. 15 - What is the difference between a product cost and...Ch. 15 - Name the three inventory accounts for a...Ch. 15 - In What order should the three inventories of a...Ch. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - How does the Cost of Goods Sold section of the...
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