A-C given the info from 5.3

5.3 Medical Clinic has traditionally allocated its overhead using patient visits. The clinic is considering dropping its OB/GYN services or cutting the salary of these employees since the segment has lost money for several years. Their accounting intern suggests using activity based accounting for the next year before making a decision. To follow are the estimated overhead costs, cost pools, and usage rates for the upcoming year. Shared Cost Pools Billing & reception Building costs Common Equipment Administration Total estimated overhead Overhead Cost Cost Driver $324,000 Patient Visits $240,000 Square feet used $210,000 Tests/Scans S90.000 Employees $864,000 Radiology OB/GYN Surgery Patient visits Square feet used Tests/Scans Employees 500 1,600 270 900 1,800 185 4 400 1400 145 Radiology $850,000 OB/GYN Surgery $940,000 $700,000 $170,000 $85,000 $115,000 $310,000 $%460,000 $330,000 Departmental equipment costs $85,000 $20,000 $15,000 Estimates By Department Revenue Direct materials costs Direct labor costs A. Traditionally overhead is allocated using the number of patient visits. Calculate the overhead applied to each department using this method. B. Use activity based costing to determine the total overhead applied to each department C. Determine the total profit by department using the traditional method and the ABC method