Question

1. Activity-Based Costing for a Service Company

   Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:

   Activity		Activity Rate
   Room and meals	$162	per day
   Radiology	$228	per image
   Pharmacy	$39	per physician order
   Chemistry lab	$73	per test
   Operating room	$820	per operating room hour

   The activity usage information associated with the two patients is as follows:

   	Abel Putin		Cheryl Umit
   Number of days	5	days	8	days
   Number of images	5	images	5	images
   Number of physician orders	6	orders	8	orders
   Number of tests	5	tests	8	tests
   Number of operating room hours	2.5	hours	6	hours

   a. Determine the activity cost associated with each patient.

   Abel Putin	$
   Cheryl Umit	$

   b. Why is the total activity cost different for the two patients?

     apparently had a different condition that required more extensive treatment. Thus, the activity cost to   is more than the activity cost of the other patient.

Answer 1

a.
Calculate activity costs of each patient as shown below:
Activity	Abel	Cheryl
Room and meals	$810	$1,296
	162*5	162*8
Radiology	$1,140	$1,140
	228*5	228*5
Pharmacy	$234	$312
	39*6	39*8
Chemistry lab	$365	$584
	73*5	73*8
Operating room	$2,050	$4,920
	820*2.5	820*6
Total activity costs	$4,599	$8,252
b.
The activity costs of Cherly is higher than Abel. This is because may b the medical condition of cheryl would be different from abel
and thus the quantity of volume required by cheryl would be higher than that required by abel.