McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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. 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. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,240,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. 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 these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost ICU 2,000 Other 18,000 Total 20,000 $ 3,204,000 Estimated variable overhead cost per patient-day $ 236 $ 14,036,000 $ 96 $ 17,240,000 Direct materials Patient A $ 4,600 Direct labor $ 25,250 Patient B $ 6,300 $ 36,200 Total number of patient-days (including ICU) Number of patient-days spent in ICU 14 0 21 7 Required: 1. Assuming McCullough continues to use 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. Note: Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount. 1a. Predetermined overhead rate 1b. Total cost for patient A 1b. Total cost for patient B per patient-day 2a. Predetermined ICU overhead rate per patient-day 2a. Predetermined Other overhead rate per patient-day 2b. Total cost for patient A 2b. Total cost for patient B 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. 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. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,240,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. 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 these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost ICU 2,000 Other 18,000 Total 20,000 $ 3,204,000 Estimated variable overhead cost per patient-day $ 236 $ 14,036,000 $ 96 $ 17,240,000 Direct materials Patient A $ 4,600 Direct labor $ 25,250 Patient B $ 6,300 $ 36,200 Total number of patient-days (including ICU) Number of patient-days spent in ICU 14 0 21 7 Required: 1. Assuming McCullough continues to use 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. Note: Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount. 1a. Predetermined overhead rate 1b. Total cost for patient A 1b. Total cost for patient B per patient-day 2a. Predetermined ICU overhead rate per patient-day 2a. Predetermined Other overhead rate per patient-day 2b. Total cost for patient A 2b. Total cost for patient B
Expert Answer:
Answer rating: 100% (QA)
1 a Predetermined overhead rate 972 b Total cost for Patient A14860 Total cost for Patient B 16916 2 ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
A company that produces aluminum foil, offers the following discount schedule for its sheets as follows: 1 to 499, $10 each; 500 to 999, $8.5 each; and 1000 or more, $8.0 each. Mini Market X orders...
-
#nmap Pn 10.138.5. 130 Host discovery disabled (-Pn). All addresses will be marked 'up' and scan times will be slower. Starting Nmap 7.91 ( https://nmap.org) at 2022-03-12 15:18 UTC Nmap scan report...
-
Randolf is putting together a syndicate for the purpose of constructing four duplexes on a piece of land he now owns. Randolf would like to raise $200,000 for construction of the duplexes. He would...
-
k) Assume that one of these portfolio's is the Market Portfolio and all portfolios, except Portfolio G, are fairly priced according to the CAPM. What is the highest utility score that can be achieved...
-
1. Why is Mr. Shelton upset? What should be done to address his complaint? 2. Based on the information presented in the case, develop a comprehensive quality improvement plan for Presto Cleaner.
-
Air flows through a duct as in Fig P9.84, where A1 = 24 cm2, A2 = 18 cm2, and A3 = 32 cm2. A normal shock stands at section 2. Compute (a) The mass flow, (b) The Mach number, and (c) The stagnation...
-
interpret the difference between disruptive innovation and sustaining innovation.
-
Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10 percent and that the investments will...
-
Consider the function f (x, y) = 8x2 - 7y subject to the condition x2 + y = 36. Use Lagrange multipliers to find the maximum and minimum values of f subject to the constraint. Maximum: Minimum: HI...
-
We will be working with a company called Global Bike Inc., (GBI). Information regarding GBI follows. Company History Global Bike Inc. has a pragmatic design philosophy that comes from its deep roots...
-
Maria's Market plans a special promotion reducing the price of organic carrots from $2.00 to $1.50 for a week. Advertising costs $600. Maria expects organic carrot sales to increase by 35%, but...
-
You are the manager of internal audit for a large North America-based financial institution. One day your staff report to you that they have discovered an error in the amount of interest paid to a...
-
You are the manager of internal auditor for Kukup Manufacturing Ltd., which is a large, diversified manufacturing company based in Kuala Lumpur, Malayasia. Kukup has well-established computer systems...
-
A \(2.0 \times 10^{9}-\mathrm{kg}\) sphere is at the origin, and a second \(5.0 \times 10^{9}-\mathrm{kg}\) sphere is on the \(x\)-axis at \(x=8.0 \mathrm{~km}\). Find the magnitude and direction of...
-
In an annual report, Craftmade International, Inc., describes its inventory accounting policies as follows: Also in an annual report, Kaiser Aluminum Corporation made the following statement in...
-
Refer to the information in SE6-9 and assume the perpetual inventory system is used. Use the LIFO inventory costing method to calculate the company's cost of goods sold and ending inventory as of...
-
A) Netbank has assets of $15 million consisting of $1 million in cash and 14 Million in loans. Netbank has core deposits of $8 million, subordinated debt of $4 million and equity of $3 million....
-
Research corporate acquisitions using Web resources and then answer the following questions: Why do firms purchase other corporations? Do firms pay too much for the acquired corporation? Why do so...
-
Interpret favorable variance (Learning Objective 5) Exhibit 10-20 shows that the Mexican sauces product line had a favorable marketing expense variance. Does this favorable variance necessarily mean...
-
Prepare inventory, purchases, and cost of goods sold budget (Learning Objective 2) Leno sells tire rims. Its sales budget for the nine months ended September 30 follows: In the past, cost of goods...
-
Prepare summary performance report (Learning Objective 1) Hanna White owns a chain of travel goods stores. Last year, her sales staff sold 10,000 suitcases at an average sales price of $150. Variable...
Study smarter with the SolutionInn App