Question

Elmo Clinic has identified three activities for daily maternity care: occupancy and feeding, nursing, and nursing supervision. The nursing supervision oversees 150 nurses, 25 of whom are maternity nurses (the other nurses are located in other care areas such as emergency room and intensive care). The nursing supervisor has three assistants, a secretary, several offices, computers, phones, and furniture. The three assistants spend 75% of their time on the supervising activity and 25% of their time as surgical nurses. They each receive a salary of S60.000. The nursing supervisor has a salary of $80,000. She spends 100% of her time supervising. The secretary receives the salary of $35,000 per year. Other costs directly traceable to the supervisory activity (depreciation, utilities, phone, etc.) average $170,000 per year. Daily care output is measured as "patient days." The clinic has traditionally assigned the cost of daily care by using a daily rate (a rate per patient day). Daily rates can differ between units, but within units the daily rates are the same for all patients. Under the traditional approach, the daily rate is computed by dividing the annual costs of occupancy and feeding, nursing, and a share of supervision by the unit's capacity expressed in patient days. The cost of supervision is assigned to each care area based on the number of nurses. A single driver (patient days) is used to assign the costs of daily care to each patient. A pilot study has revealed that the demands for nursing care vary within the maternity unit, depending on the severity of a patient's case. Assume that the maternity unit has three levels of increasing severity normal patients, cesarean patients, and patients with complications. The pilot study provided the following activity and cost information: Activity Annual Cost Activity Driver Annual Quantity Occupancy and Feeding Nursing Care (maternity) Nursing Supervision $1,500,000 $1,200,000 Patient days Hours of nursing care Number of nurses 10,000 50,000 150 The pilot study also revealed the following information concerning the three types of patients and their annual demands: Patient Type Patient Days Demanded Nursing Hours Demanded Normal Cesarearn Complications Total 7,000 2,000 1000 17,500 12,500 20,000 50,000 Required: 1. Calculate the maternity cost per patient day by using a functional-based approach. This is a traditional approach that costs maternity cases by patient day as a whole based on the total cost of maternity care.

Answer 1

Particulars Cost of Supervision Salary of Supervisor (Direct) Salary of Assistants (S60000 X 3 X.75) Salary of Secretary (Direct) Other Costs Total Amount(S) 80000 135000 35000 170000 420000 Cost of Nursing Supervison 420000 25/150 70000 Calculation of Total Cost of Care Occupancy & Feeding Nursing Care (maternity) Nursing Supervison Total Cost of care 1500000 1200000 70000 2770000 Cost per patient day- 2770000/10000 $277 per day

Maternity nursing care assignment- 25/150 X 420000 70000 Thus, the total cost of nursing care 1210000 1200000 + 70000 Next, calculate the activity rates for the two primary activities Occupancy and feeding-1500000 10000-150 per day Nursing care 1270000 50000 25.40 per nursing hour Cost per patient day Normal (150 x 7000)t(17500 X 25.40)/7000 $213.50 $308.75 Cesarean 1(150 x 2000)+ (12500 X 25.40)3/2000 $658.00 Complications (150 x 1000)+ (20000 X 25.40)/1000