Question

ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountant has gathered the following data for the most recent annual period: Resident Classification Annual Resident Days Annual Assistance Hours Number of Assistance Contacts 8,760 15,000 60,000 6,570 20,000 52,000 22,500 52,000 2,190 32,500 52.000 21,900 90,000 216,000 Support А B с 4,380 D Other data: Total cost of medical services for the period $5,000,000 Total cost of meals and residential space $3,280,000 a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. Round answer below to the nearest dollar. Medical services cost per assistance hour $ 56 NOTE: Use your rounded answer above to compute the answers below. Round your final answers to the nearest dollar. $ Per Day Costs Medical Services Meals and Residential Class A $ 96 $ 41 X Class B 170 58 X Class C 288 98 x Class D 831 534 x Total 123 x 280 x 473 X 1,365 x b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver. Round answer below to the nearest dollar. Medical services cost per assistance contacts $ 23 NOTE: Use your rounded answer above to compute the answers below. Round your final answers to the nearest dollar. Per Day Costs Medical Services Meals and Residential Total Class A $ 158 31 x 260 x Class B 182 110 x 301 x Class C 273 178 X 451 X Class D 546 902 X 356 X

Answer 1

a. ABC using assistance hours as the cost driver Medical services cost per assistance hour Meals and residential space cost per assistance hour $ $ 56 =5000000/90000 36 =3280000/90000 Per day Cost - Per day Cost - Medical services Meals and residential Medical Meals and Annual Assistance Hours cost per assistance space cost per assistance services Residential Total Resident Classification Annual Resident Days (a) (b) hour (c) hour (d) (e=b*c/a) (f=b*d/a) (e+f) Class A 8760 15000 $ 56 $ 36 $ 96 $ 62 $ 158 Class B 6570 20000 $ 56 $ 36 $ 170 $ 110 $ 280 Class C 4380 225000 $ 56 $ 36S 288 $ 185$ 473 Class D 21901 32500 $ 56 $ 36 $ 831 $ 534 $ 1,365 219001 90000 Answer as per format Medical services cost per assistance hour $ 56 Class A Class B Medical services $ $ $ $ Per day Costs Meals and Residential Total 96 $ 62 $ 170$ 110$ 288 $ 185$ 831 $ 534 $ 158 280 473 1,365 class C Class D

b ABC using assistance contacts as the cost driver Medical services cost per assistance hour Meals and residential space cost per assistance hour $ $ 23 15 =5000000/216000 =3280000/216000 Per day Cost - Per day Cost - Medical services Meals and residential Medical Meals and Annual Assistance Hours cost per assistance space cost per assistance services Residential Total Resident Classification Annual Resident Days (a) (b) hour (c) hour (d) (e=b*c/a) (f=b*d/a) (e+f) Class A 87601 60000 $ 23 $ 15$ 158$ 103 $ 260 Class B 52000 $ 23 $ 15$ 182 $ 119 $ 301 Class C 43801 52000 $ 23 $ 15 $ 273 $ 178 $ 451 Class D 2190 52000 $ 23 $ 15$ 546 $ 356 $ 902 219001 2160001 Answer as per format Medical services cost per assistance hour $ 23 6570 Class A Class B Class C Class D Medical services $ $ $ $ 158 182 273 546 Per day Costs Meals and Residential Total $ 103 $ $ 119 $ $ 178$ $ 356 $ 260 301 451 902

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