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 RM 168.000 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 200 1.000 In-room OR Costs Costs RM RM 500 2.400 2.000 3.000 Patient medicine Direct nursing time 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]

Answer 1

Ans

a)

Define job-costing and explain when it is appropriate to use this form of costing.

Job costing refers to a method of calculating cost on the basis of particular job . So by using this one can easily find out the cost related to a particular job or we can say particular product cost.

Job Costing method is appropriate to use when the company want to find out the cost of particular job or product separately or when the company is engage in producing products according to the customer's need and specification. This will help in deciding the price to be charged for a particular product.

b)

Nursing overhead rate PRE-OP = RM168,000/4,000 hrs = RM 42 per hour

Nursing overhead rate OR = RM132,000/2,000 hrs = RM 66 per hour

Nursing Overhead rate for surgery floor = RM1,200,000/15,000 hrs. = RM 80 per hour

Patient Adam Malik Nursing Overhead as

Pre-OP = (RM 42 * 8 hours) = RM 336

OR = (RM 66 * 4 hours) = RM 264

In-room (RM 80 × 96 hours) = RM 7,680

In 4days total hours = 24 * 4 = 96 hours

Now,

Pre-OP total cost = RM 200 + RM1,000 + RM 336= RM 1,536

OR total cost = RM 500 + RM 2,000 + RM 264 = RM 2,764

In Room total cost = RM 2,400 + RM 3,000 + RM 7,680 = RM 13,080

So Total Cost of Adam Malik's stay at hospital is

RM 1,536 + RM 2,764 + RM 13,080 = RM 17,380