1. ABC, Resource Drivers, Service Industry

   Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinics administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. Second, the occupancy activity is a combination of two activities: lodging and use of monitoring equipment. Since some patients require more monitoring than others, these activities should be separated. Third, the daily rate should reflect the difference in demands resulting from differences in patient type. Separating the occupancy activity into two separate activities also required the determination of the cost of each activity. Determining the costs of the monitoring activity was fairly easy because its costs were directly traceable. Lodging costs, however, are shared by two activities: lodging cardiology patients and lodging maternity care patients. The total lodging costs for the two activities were $5,631,000 per year and consisted of such items as building depreciation, building maintenance, and building utilities. The cardiology floor and the maternity floor each occupy 21,400 square feet. Hepworth determined that lodging costs would be assigned to each unit based on square feet.

   To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:

   Activity	Cost of Activity	Activity Driver	Quantity
   Lodging	$ 631,620	Patient days	21,780
   Monitoring	2,158,610	Monitoring hours used	29,570
   Feeding	457,380	Patient days	21,780
   Nursing care	4,382,000	Nursing hours	219,100
   Total	7,629,610

   The demands associated with patient severity are also provided:

   Severity	Patient Days	Monitoring Hours	Nursing Hours
   High	7,540	14,980	130,600
   Medium	10,870	11,530	76,500
   Low	3,370	3,060	12,000

   Required:

   1. Suppose that the costs of daily care are assigned using only patient days as the activity driver (which is also the measure of output). Compute the daily rate using this unit-based approach of cost assignment. If required, round your answer to the nearest cent. $ per day

   2. Compute activity rates using the given activity drivers (combine activities with the same driver). If required, round your answers to the nearest cent.

   Rate 1	$ per patient day
   Rate 2	$ per monitoring hour
   Rate 3	$ per hour of nursing care

   3. Compute the charge per patient day for each patient type using the activity rates from Requirement 2 and the demands on each activity. Round your interim calculations and final answers to the nearest cent.

   High severity	$ per patient day
   Medium severity	$ per patient day
   Low severity	$ per patient day