Question

HW 2 Saved Help Save &Exit Submit 10 Check my work McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the clock monitoring of patients are treated as overhead costs. points Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to the hospital's estimated number of patient-days, its estimated overhead costs, and two of its patients-Patient A and Patient B-is provided below: eBook Print ICU other Total Estinated number of patient-days Estinated fixed overhead cost Estinated variable overhead cost per patient-day 2,200 $3,979, 800 241 8,800 6, 767, 200 116 11,000 $10,747,000 Reterences Patient A Patient B Direct materials Direct labor Total number of patient-days (including ICU S4,700 S6,400 25,500 S 36,400 16 r of patient-days spent in Required 1. Assuming McCullough uses only one predetermined overhead rate, calculate a. The predetermined overhead rate b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round your intermediate calculations and final answers to the nearest dollar amount.)

Answer 1

1a. Predetermined overhead rate = Estimated total overhead cost/Estimated total number of patient-days = $12298000/11000 = $1118 per patient-day.

Estimated total overhead cost:
Variable overheads
ICU (2200 x $241)	530200
Other (8800 x $116)	1020800
Fixed overheads	10747000
Total overhead cost $	12298000

1b.

	Patient A	Patient B
Direct materials	4700	6400
Direct labor	25500	36400
Overheads	12298	17888
Total cost $	42498	60688

2a.

	ICU	Other
Variable overheads	530200	1020800
Fixed overheads	3979800	6767200
Estimated total overheads $ (i)	4510000	7788000
Estimated number of patient-days (ii)	2200	8800
Overhead rate $ (i)/(ii)	2050	885

2b.

	Patient A	Patient B
Direct materials	4700	6400
Direct labor	25500	36400
Overheads:
ICU	0	8200
Other	9735	10620
Total cost $	39935	61620