Question

include the formula here Activity cost calculations: Set up cost Production scheduling cost Production engineering cost Supervision cost Machine operating cost Direct materials Direct labor Manufacturing overhead cost Total Job 845 cost Total Job 845 cost Total Job 845 cost

Answer 1

Following is the solution to Question P5-3A. Excel extracts pasted are irrelevant to the question posted and hence, I have not commented on them.

Note: All amounts in $

Solution to Requirement "a"

Particulars	Resident category
	A	B	C	D	Total
Number of annual assistance hours	15,000	20000	22500	32500	90,000
Allocation of total cost of medical services for the period in the ratio of the cost driver,i.e. Annual assistance hours (A)	833,333	1,111,111	1,250,000	1,805,556	5,000,000
Calculation or Formulae	(5,000,000/90,000*15,000)	(5,000,000/90,000*20,000)	(5,000,000/90,000*22,500)	(5,000,000/90,000*32,500)
Allocation of total cost of meals and residential space for the period in the ratio of the cost driver,i.e. Annual assistance hours (B)	546,667	728,889	820,000	1,184,444	3,280,000
Calculation or Formulae	(3,280,000/90,000*15,000)	(3,280,000/90,000*20,000)	(3,280,000/90,000*22,500)	(3,280,000/90,000*32,500)
Total cost for each category of resident using "Annual assistance hours" as the cost driver (A+B)	1,380,000	1,840,000	2,070,000	2,990,000	8,280,000
Annual resident days	8,760	6,570	4,380	2,190	21,900
Calculation or Formulae	(1,380,000/8,760)	(1,840,000/6,570)	(2,070,000/4,380)	(2,990,000/2,190)	(8,280,000/21,900)
ABC cost of a resident day for each category of resident using "Annual assistance hours" as the cost driver	158	280	473	1,365	378

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Solution to Requirement "b"

Particulars	Resident category
	A	B	C	D	Total
Number of assistance contracts	60,000	52,000	52,000	52,000	216,000
Allocation of total cost of medical services for the period in the ratio of the cost driver,i.e. Annual assistance contracts	1,388,888.89	1,203,703.70	1,203,703.70	1,203,703.70	5,000,000
Allocation of total cost of meals and residential space for the period in the ratio of the cost driver,i.e. Annual assistance contracts	911,111.11	789,629.63	789,629.63	789,629.63	3,280,000
Total cost for each category of resident using "Annual assistance contracts" as the cost driver	2,300,000	1,993,333	1,993,333	1,993,333	8,280,000
Annual resident days	8,760	6,570	4,380	2,190	21,900
ABC cost of a resident day for each category of resident using "Annual assistance contracts" as the cost driver	263	303	455	910	378

Note: Calculation or formulae are the same as in Requirement "a". The only difference being replacement of number of annual assistance hours being replaced by number of annual assistance hours.

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Solution to Requirement "c"

Number of Annual assistance contracts provides more accurate measure of the cost per day for a Grand Haven Resident because it has been clearly stated that

• Medical Services tends to vary significantly among the residents
• A contract is registered each time an assistance professional provides medical services to a resident.

Therefore number of contracts have direct correlation to the medical services availed by a resident and therefore is a much better and accurate cost driver vis-a-vis the number of annual assistance hours.