Question

7. (a) Define job-costing and explain when it is appropriate to use this form of costing. [4 marks] (b) Laut Hospital uses a job-costing system to track the cost of servicing patients. In March, the pre-operating room (PRE-OP) and operating room (OR) had budgeted allocation bases of 4,000 nursing hours and 2,000 nursing hours, respectively. The budgeted nursing overhead charges for each department for the month were RM168,000 and RM132,000, respectively. The hospital floor for surgery patients had budgeted overhead costs of RM1,200,000 and 15,000 nursing hours for the month. For patient Adam Malik, actual hours incurred were eight and four hours, respectively, in the PRE-OP and OR rooms. He was admitted to the hospital for 4 days. ...6/- Other costs related to Adam were: PRE-OP Costs RM Patient medicine 200 Direct nursing time 1,000 In-room OR Costs Costs RM RM 500 2,400 2,000 3,000 The hospital uses a budgeted overhead rate for applying overhead to patient stays. Required: Calculate the cost of Adam Malik's stay at the hospital. [16 marks] (c) Laut's competitor Hospital EeWah Nam uses an indirect job-costing system for all patients. In June, the budgeted nursing care charges for each department and budgeted allocation bases of nursing days are as follows:

Answer 1

2.
Predetermined overhead rate
PRE-Op = 168000/4000 = 42 per nursing hour
OR = 132000/2000 = 66 per nursing hour
Floor charges = 1200000/15000 = 80 per nursing hour

Cost of Adams Stay

	Pre OP	OR	In room	Total
Patient Medicine	200	500	2400	3100
Direct nursing time	1000	2000	3000	6000
Overhead	336	264	960	1560
Total Cost	1536	2764	6360	10660

Overhead allocation
Pre Op = 8*42 = 336
OR = 4*66 = 264
In room = (8+4) * 80 = 960

3.

	Critical Care	Special Care	General Care
Budgeted nursing Costs	2480000	1644000	1280400
Budgeted nursing days	5000	4000	8000
Budgeted overhead rate	496	411	160.05

	Critical Care	Special Care	General Care	Total
Budgeted overhead rate	496	411	160.05
Days spent	6	8	16
Total charges	2976	3288	2560.8	8824.8

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