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:

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

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.