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Required: Prepare an activity dictionary with three categories: activity name, activity description, and activity driver. Activity Name Providing nursing care Supervising nurses Feeding patients Laundering bedding and clothes Providing physical therapy Monitoring patients Cleaning and delivering clothes and bedding Coordinating nursing activities Providing meals to patients Satisfying patient needs Therapy treatments directed by physician Using equipment to monitor patient conditions Activity Driver ((4444 Formation of an Activity Dictionary A hospital is in the process of implementing an ABC system. A pilot study is being done to assess the effects of the costing changes on specific products. Of particular interest is the cost of caring for patients who receive in-patient recovery treatment for illness, surgery (noncardiac), and injury. These patients are housed on the third and fourth oors of the hospital. The floors are dedicated to patient care and have only nursing stations and patient rooms. A partial transcript of an interview with the hospital's nursing supervisor is as follows: 1. How many nurses are in the hospital? There are 101 nurses, including me. 2. Of these 100 nurses, how many are assigned to the third and fourth floors? Fifty nurses are assigned to these two oors. 3. What do these nurses do (please describe)? Provide nursing care for patients, which, as you know, means answering questions, changing bandages, administering medicine, changing clothes, etc. 4. And what do you do? I supervise and coordinate all the nursing activity in the hospital. This includes surgery, maternity, the emergency room, and the two floors you mentioned. 5. What other lodging and care activities are done for the third and fourth oors by persons other than the nurses? The patients must be fed. The hospital cafeteria delivers meals. The laundry department picks up dirty clothing and bedding once each shift. The oors also have a physical therapist assigned to provide care on a physician-directed basis. 6. Do patients use any equipment? Yes. Mostly monitoring equipment. 7. Who or what uses the activity output? Patients. But there are different kinds of patients. On these two oors, we classify patients into three categories according to severity: intensive care, intermediate care, and normal care. The more severe the illness, the more activity is used. Nurses spend much more time with intermediate care patients than with normal care. The more severe patients tend to use more of the laundry service as well. Their clothing and bedding need to be changed more frequently. On the other hand, severe patients use less food. They eat fewer meals. Typically, we measure each patient type by the number of days of hospital stay. And you have to realize that the same patient contributes to each type of product. Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment $572,000 Other overheard $2,552,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Fudge Cookies Units produced 8,000 445,000 Setup hours 10,400 2,600 Oven hours 2,200 15,400 Required: Round your answers to the nearest whole dollar, unless otherwise directed. 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead. a. Setting up equipment per setup hour b. Other overhead per oven hour 2. How much total overhead is assigned to Fudge using ABC? tA 3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $ per unit 4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. different treatment of setup costs. $ per oven hour difference in the units produced. 5. How much total overhead is assigned to Fudge using the plantwide overhead rate? difference in the sale prices of the products. different oven temperatures required for haking fudge and cookiesType of Activity Management The following six situations at Diviney Manufacturing Inc. are independent. Requlred: For each situation, identify the cost reduction measure: activity elimination, activity reduction, activity sharing, or activity selection. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour 'ne hour is $8, and the cost per pound of materials is $10. 'ACtIVlty reductlon b. With its original design, a gear requires 8 hours of setup time. By redesigning the gear so that the number of different grooves needed is reduced by 50%, the setup time is reduced by 75%. The cost per setup hour is $50. v c. A product currently requires 6 moves. By redesigning the manufacturing layout, the number of moves can be reduced from 6 to 0. The cost per move is $20. v d. Inspection time for a plant is 16,000 hours per year. The cost of inspection consists of salaries of 8 inspectors, totaling $320,000. Inspection also uses supplies costing $5 per inspection hour. The company eliminated most defective components by eliminating low-quality suppliers. The number of production errors was reduced dramatically by installing a system of statistical process control. Further quality improvements were realized by redesigning the products, making them easier to manufacture. The net effect was to achieve a close to zero-defect state and eliminate the need for any inspection activity. v e. Each unit of a product requires 6 components. The average number of components is 6.5 due to component failure, requiring rework and extra components. Developing relations with the right suppliers and increasing the quality of the purchased component can reduce the average number of components to 6 components per unit. The cost per component is $500. v f. A plant produces 100 different electronic products. Each product requires an average of 8 componens that are purchased externally. The components are different for each part. By redesigning the products, it is possible to produce the 100 products so that they all have 4 components in common. This will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are $900,000 per year