Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 5.39P
ABC, health care. Crosstown Health Center runs two programs: drug addict rehabilitation and aftercare (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 | 92,400 | |
| Total | $2,937,000 |
Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiles the following data describing employee allocations to individual programs:
Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted
- a. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for medical supplies: rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services.
Required
- b. Using an activity-based costing approach to cost analysis, calculate the budgeted cost of each program and the budgeted cost per patient-year of the drug program.
- c. What benefits can Crosstown Health Center obtain by implementing the ABC system?
- 2. What factors, other than cost, do you think Crosstown Health Center should consider in allocating resources to its programs?
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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…
TASK A. Problem Solving. Analyze the given problem and perform the required tasks in
the worksheet provided.
1. A hospital has P250,000 expected utility bill this year. The janitorial, accounting, and
orderlies departments are service departments servicing the operating, hospital rooms,
and laboratories departments. Floor spaces assigned to each department are as follows
Department
Square Footage
Janitorial
Accounting
Orderlies
1,000
2,000
7,000
Operating
Hospital rooms
Laboratories
4,000
30,000
6,000
How much of the P200,000 will eventually become the hospital rooms department's total
costs, assuming a direct allocation based in square footage is used?
2. The Laptop complex, which offers two main services: 1) time on a time-shared computer
and (2) propriety computer programs. Computer time is provided by the Operating
Department (OD), and programs are written by the programming Department(PD).
Usually, the Operating Department spends P 9,000 and the Programming Departmemnt
spends…
General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services:
Fixed costs
$1,093,754
Variable cost per inpatient day
$19
Charge (revenue) per inpatient day
$105
The hospital expects to have a patient load of 1,599 inpatient days next year. Assume that 18 percent of the hospital's inpatient days come from a managed care plan that wants a 27 percent discount from charges. What is the change in profit if the hospital accepts the proposal?
Chapter 5 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8QCh. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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