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PROBLEM 4B-5 Step-Down Method L04-11
Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below:
Service Departments
Operating Departments
Housekeeping Services |
Food Services | Admin. Services | Laboratory | Radiology | General Hospital |
Total | |
Total cost | $87,000 | $301,060 | $249,020 | $405,900 | $520,500 | $475,800 | $2,039,280 |
Meals served | 800 | 2,000 | 1,000 | 68,000 | 71,800 | ||
Square feet of space | 5.000 | 13,000 | 6,500 | 10,000 | 7,500 | 108,000 | 150,000 |
Files processed | 14,000 | 7,000 | 25,000 | 46,000 |
The costs of the service departments are allocated by the step-down method using the allocation bases and in the order shown in the following table:
Service Department Allocation Bases Housekeeping Services Square feet of space Food Services Meals served Administrative Services Ales processed
All tilling in the hospital is done through Laboratory, Radiology or General Hospital. The hospital's administrator wants the costs of the three service departments allocated to these three billing centers.
Required:
Using the step-down method, prepare the cost allocation desired by the hospital administrator. Include under each billing center the direct costs of the center, as well as the costs allocated from the service department.
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Managerial Accounting
- TASK SEVEN ABC, health care. Crosstown Health Center runs two programs: drug addict rehabilitation and after care (counseling and support of patients after release from a mental hospital). The center’s budget for 2017 follows. Professional salaries: 4 physicians * $150,000 $600,000 12 psychologists * $75,000 900,000 16 nurses * $30,000 480,000 $1,980,000 Medical supplies 242,000 Rent and clinic maintenance 138,600 Administrative costs to manage patient charts, food, laundry 484,000 Laboratory services…arrow_forwardOBJECTIVE 2456 sout cost behavior that you would like to have? Explain. Problem 3-28 HIGH-LOW METHOD, SCATTERPLOT, REGRESSION Weber Valley Regional Hospital has collected data on all of its activities for the past 16 months. Data for cardiac nursing care follow: Y x Cost Hours of Nursing Care May 2010 $59,600 1,400 June 2010 57,150 1,350 July 2010 61,110 1,460 August 2010 65,800 1,600 (continued) Chapter 3 Cost Behavior Y Cost x Hours of Nursing Care September 2010 69,500 1,700 October 2010 64,250 1,550 November 2010 52,000 1,200 December 2010 66,000 1,600 January 2011 83,000 1,800 February 2011 66,550 1,330 March 2011 79,500 1,700 April 2011 76,000 1,600 May 2011 June 2011 68,500 1,400 73,150 1,550 July 2011 August 2011 73,175 1,505 66,150 1,290 Required: 1. Using the high-low method, calculate the variable rate per hour and the fixed cost for the nursing care activity. 125arrow_forwardService Department Operating Department Information Administration Technology Prenatal Pediatric $ 54,736 $ 37,449 $ 383,270 $ 259,590 Departmental costs Employees 15 21 118 172 Personnel costs 15 21 102 109 Administration costs are allocated first on the basis of employees and Information Technology costs are allocated second on the basis of Personnel costs. The total Pediatric Department cost after allocations is closest to: Multiple Choice $31,117 $280,845 $304,995 $311,400arrow_forward
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- Algebraic method The following chart indicates the percentage of support department services used by other departments. Service departments are designated S1, S2, and S3; operating departments are designated RP1 and RP2. Services Used S3 Department S1 S2 N/A 10% 40% N/A S1 S2 S3 20 30 N/A RP1 RP2 20% 30% 40% 30 20 10 40 10 Direct costs of the period were $170,000, $360,000, and $600,000 for S1, S2, and S3, respectively. Allocate the support department costs to the operating departments using the algebraic method. Note: Do not round proportions in your calculations; round your final answer to the nearest whole dollar. Note: Round your final answers below to the nearest 100; for example, round 8,668 to 8,700.arrow_forwardEX 4-20 Activity-based costing for a service company Obj. 6 Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: EXCEL TEMPLATE Activity Activity Rate $ 240 per day $ 215 per image $ 50 per physician order $ 80 per test $1,000 per operating room hour Room and meals Radiology Pharmacy Chemistry lab Operating room The activity usage information associated with the two patients is as follows: Abel Putin Cheryl Umit Number of days 6 days 4 days Number of images Number of physician orders 4 images 3 images 6 orders 2 orders Number of tests 5 tests 4 tests Number of operating room hours 8 hours 4 hours A. Determine the activity cost associated with each patient. Answer Why is the total activity cost different for the two patients? B.arrow_forwardNursing staff budget Mercy Hospital staffs its medical/surgical floors with nurses depending on the number of patients assigned to the floor and the severity of their condition. The index used to capture nurse effort is termed a relative value unit, or RVU. For example, taking vital signs for a single patient may be equal to one RVU. RVU's are then summed to estimate the total RVU requirements for the floor. From this, the nursing staff budget is determined. The medical/surgical floor is scheduled to have 25 patients for each day of the coming seven-day week. Some patients will require more nursing effort than others, depending on the severity of their conditions or their ages. The following table summarizes the expected RVU requirements for the patients: Number of Patients RVUs per Day 5 20 8 25 10 30 2 40 A nurse earns 180 per day and is able to perform 40 RVUs per day. A. Determine the total number of RVUs expected per day for the coming week. B. Determine the total weekly nurse budget for the coming week.arrow_forward
- The Bienestar Cardiology Clinic has two major activities: diagnostic and treatment. The two activities use four resources: nursing, medical technicians, cardiologists, and equipment. Detailed interviews have provided the work distribution matrix shown below. The total time estimated corresponds to practical capacity (interviewers adjusted the total time to about 80 percent of the available time). The equipment time is measured in machine hours. Thus, the total time (at practical capacity) in the system is 20,000 hours. In considering the implementation of a TDABC model, the following unit times and transaction information are also provided: Required: 1. Calculate the cost of each activity using the indicated values of the resource drivers. 2. Calculate the capacity cost rate for TDABC. Using the capacity cost rate, calculate the cost of each activity under TDABC. Compare these values with those obtained in Requirement 1 and discuss possible reasons for any differences. 3. Suppose that the actual activity driver quantities are 3,500 and 9,000. Calculate the cost of unused capacity. 4. Suppose that the clinic acquires new equipment that reduces the total time required for the two activities from 6,000 to 4,000 hours. The equipment cost remains the same. Explain how the ABC system would be updated and then describe how TDABC would provide updates. 5. Suppose that diagnosing patients without any cardiac disease takes two hours while diagnosing patients with mildly diseased hearts takes an additional 1.5 hours and those with more severe problems takes an additional two hours. Prepare a time equation and, using the capacity cost rate from Requirement 2, calculate the activity rate for each of the three types of patients.arrow_forward(Appendix 4B) Support Department Cost Allocation MedServices Inc. is divided into two operating departments: Laboratory and Tissue Pathology. The company allocates delivery and accounting costs to each operating department. Delivery costs include the costs of a fleet of vans and drivers that drive throughout the state each day to clinics and doctors offices to pick up samples and deliver them to the centrally located laboratory and tissue pathology offices. Delivery costs are allocated on the basis of number of samples. Accounting costs are allocated on the basis of the number of transactions processed. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Required: 1. Assign the support department costs by using the direct method. (Note: Round allocation ratios to four decimal places.) 2. Assign the support department costs by using the sequential method, allocating accounting costs first. (Note: Round allocation ratios to four decimal places.)arrow_forward6.2 Refer to Problem 6.1. Assume that the three patient services departments are adult services, pediatric services, and other services. The patient services revenue and hours of housekeeping services for each department are as follows: Department Revenue Housekeeping Hours Adult Services $3,000,000 1,500 Pediatric Services 1,500,000 3,000 Other Services 500,000 Total $5,000,000 500 5,000 a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver? b. What is the dollar allocation to each patient services department if hours of housekeeping support is used as the cost driver? c. What is the difference in the allocation to each department. between the two drivers? d. Which of the two drivers is better? Why?arrow_forward
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