Kabwe Medical Centre is a specialised medical facility that treats out patients in three areas of treatment,
Question:
Kabwe Medical Centre is a specialised medical facility that treats out patients in three areas of treatment, namely, Gynaecology, Paediatrics, and Specialised Radiology. The consultation fees per patient for Gynaecology, Paediatrics and Specialised Radiology are K400 K500 and K600 respectively. The Management Accountant has compiled the following information about each of the three units:
Gynaecology
Paediatrics
Specialised Radiology
Number of Patients
10 000
15 000
18 000
Floor Area
240sqm
260sqm
200sqm
Number of Doctors
2
3
4
Number of IT support visits
12
4
24
Additionally, an individual support division services these three units. The following activities, with the associated costs, have been identified:
Overhead Cost
Overhead Allocation Base
Rent
K250 000
Floor Area
Utilities
K100 000
Number of patients
IT Support
K1,500,000
Number of support visits
Billing
K400 000
Revenues
Cleaning
K150 000
Floor Area
Office Administration
K750 000
Number of Doctors
The following costs can be traced to each of the three units in a convenient manner:
Gynaecology
Paediatrics
Specialised Radiology
Medical Supplies:
K100 000
K55 000
K250 000
Salary of Doctors:
K1,500,000
K1,900,000
K2 500 000
Other
K150 000
K200 000
K450 000
Questions:
A.Using number of patients as an allocation base, calculate the total cost assigned to each of the three units using simple costing [5 Marks]
B.Calculate the total cost assigned to each of the three units using Activity Based Costing [33 Marks]
C.Suppose that the office manager decides to hire a cleaner for each of the three units. The cleaning cost per unit are K75 000, K85 000 and K140 000 for the Gynaecology, Paediatric and Radiology units respectively. Calculate the total cost assigned to each of the units using Activity Based Costing. [6 Marks]
D.Calculate the operating income of each unit using Simple Costing and Activity Based Costing assuming that the cleaning costs can be traced to each of the units. Briefly comment on your profitability analysis of each of the three units [12 Marks]
Expert Answer:
