Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Textbook Question
Chapter 27, Problem 4PA
Pareto chart and cost of quality report for a service company
The administrator of Liberty Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:
Instructions
- 1. Prepare a Pareto chart of the ER activities.
- 2. Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities.
- 3. Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities.
- 4. Determine the percentages of the total ER costs that are value-added and non-value-added.
- 5. Interpret the information.
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2. The administrator of Hope Hospital has been asked to perform an activity analysis of the emergency
room (ER), The ER activities include cost of quality and other patient care activities. The lab tests and
transportation are hospltal services external to the ER for determining external failure costs. The
result of the activity analysis is summarized as follows:
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
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Q1a. Allocate the service department costs to the two operating departments using the direct method.
b.Allocate the service department cost to the two operating departments using ,I)the step-down method (Allocate administrative service first) . ii)the step down method (Allocoate Maintenance service first)
c. Assuming you are the manager of the Daily Patient department.Discuss which method of cost allocation would you prefer.Justify your decision
d.Mr Smith the financial controller of LabAid is convinced that the step-down method allocates more costs to the operating departments than the direct method.Do you agree with ,Mr Smith.Explain.
Chapter 27 Solutions
Financial And Managerial Accounting
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