Question

Exercise 17-18 Activity-based costing LO P3 Surgery Center is an outpatient surgical clinic that was profitable for many years, but Medicare has cut its reimbursements by as much as 40%. As a result, the clinic wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinic's three activity cost pools and their cost drivers follow Activity Cost Pool Professional salaries Patient services and supplies Building cost Cost Cost Driver $1,008,000 Professional hours 16,280 Number of patients 80,400 square feet Driver Quantity 8,400 440 1,340 The two main surgical units and their related data follow. Service General surgery Orthopedic surgery Hours 1,700 6,700 Square Feet 520 820 Patients 320 120 * Orthopedic surgery requires more space for patients, supplies, and equipment. Required: 1. & 2. Compute the cost per cost driver for each of the three activity cost pools. Use the results to allocate costs to both the general surgery and the orthopedic surgery units. Compute total cost and average cost per patient for both the general surgery and the orthopedic surgery units. (Round your final answers to whole dollar.) General Surgery Activity driver Overhead incurred assigned Orthopedic Surgery Activity driver Overhead assigned incurred Overhead Cost Activity Drivers Activity Rate Activity Professional salaries Patient services and supplies Building cost Professional hours Number of patients Square feet

Answer 1

Activity Overhead cost Activity drivers Orthopedic surgery Activity Overhead driver assigned incurred a e схе Professional salaries $ 1,008,000 Patient services and supplies $ 16,280 Building cost $ 80,400 $ 1,104,680 b 8,400 Professional hours 440 Number of patients 1,340 Square feet General surgery Activity rate Activity Overhead driver assigned incurred c=a:b d cxd $ 120.00 per professional hour 1700 $ 204,000 $ 37.00 per patient 320 $ 11,840 $ 60.00 per square feet 520 $ 31,200 Total costs (i) $ 247,040 Number of patients (ii) 320 Average cost per patient (i - ii) $ 772 6700 $ 804,000 120 $ 4,440 820 $ 49,200 $ 857,640 120 $ 7,147