The administrator of Liberty Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:

Instructions

1. Prepare a Pareto chart of the ER activities.

2. Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities.

3. Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities.

4. Determine the percentages of the total ER costs that are value-added and non-value-added.

5. Interpret the information.

Transcribed Image Text:

Activities Activity Cost $ 6,500 Patient registration Verifying patient information Assigning patients Searching/waiting for doctor 9,700 13,000 9,200 4,900 Doctor exam Waiting for transport Transporting patients Verifying lab orders Searching for equipment 17,500 16,200 14,500 8,200 Incorrect labs 11,300 Lab tests 17,000 Counting supplies Looking for supplies Staff training Total 19,000 8,200 4,800 $160,000