question i am stuck on question 2 activity costing assigningresource costs primary a 4284023
Question
I am stuck on question 2.
Activity Costing, AssigningResource Costs, Primary and Secondary Activities
Elmo Clinic has identified three activities for daily maternitycare: occupancy and feeding, nursing, and nursing supervision. Thenursing supervisor oversees 150 nurses, 25 of whom are maternitynurses (the other nurses are located in other care areas such asthe emergency room and intensive care). The nursing supervisor hasthree assistants, a secretary, several offices, computers, phones,and furniture. The three assistants spend 75% of their time on thesupervising activity and 25% of their time as surgical nurses. Theyeach receive a salary of $60,000. The nursing supervisor has asalary of $80,000. She spends 100% of her time supervising. Thesecretary receives a salary of $35,000 per year. Other costsdirectly traceable to the supervisory activity (depreciation,utilities, phone, etc.) average $170,000 per year.
Daily care output is measured as “patient days.” The clinic hastraditionally assigned the cost of daily care by using a daily rate(a rate per patient day). Daily rates can differ between units, butwithin units the daily rates are the same for all patients. Underthe traditional approach, the daily rate is computed by dividingthe annual costs of occupancy and feeding, nursing, and a share ofsupervision by the unit's capacity expressed in patient days. Thecost of supervision is assigned to each care area based on thenumber of nurses. A single driver (patient days) is used to assignthe costs of daily care to each patient.
A pilot study has revealed that the demands for nursing carevary within the maternity unit, depending on the severity of apatient's case. Assume that the maternity unit has three levels ofincreasing severity: normal patients, cesarean patients, andpatients with complications. The pilot study provided the followingactivity and cost information:
|
Activity |
Annual Cost |
|
Activity Driver |
Annual Quantity |
|
Occupancy and feeding |
$1,500,000 |
|
Patient days |
10,000 |
|
Nursing care (maternity) |
1,200,000 |
|
Hours of nursing care |
50,000 |
|
Nursing supervision |
? |
|
Number of nurses |
150 |
The pilot study also revealed the following informationconcerning the three types of patients and their annualdemands:
|
Patient Type |
Patient Days Demanded |
Nursing Hours Demanded |
||
|
Normal |
7,000 |
|
17,500 |
|
|
Cesarean |
2,000 |
|
12,500 |
|
|
Complications |
1,000 |
|
20,000 |
|
|
Total |
10,000 |
|
50,000 |
|
Required:
1. Calculate the cost per patient day by usinga functional-based approach.
$ per patient day
2. Calculate the cost per patient day by usingan activity-based approach. (Round rates and unit cost to twodecimal places.)
|
Patient |
Daily Rate (per patient day) |
|
|
Normal |
$ |
|
|
Cesarean |
$ |
|
|
Complications |
$ |
|