activity based costing. Referring to exhibit 12.10, suppose that instead of 2000, 5000, and 3000 for an initial, regular and intensive visit, respectively, the number of visits was 2500, 6000, and 2000. Assume that the costs associated with intake, new visits, medical records and billing do not change in number or distribution. a) Would there be a change in the overhead cost per visit of an initial visit using either the conventional or ABC methods? b) Would there be a change in the total overhead cost of initial visits using either the conventional or ABC.

EXHIBIT 12.10 A COMPARISON OF A CONVENTIONAL AND AN ABC APPROACH TO COSTING THE SERVICES Given overall percentages and totals GB Visit Type GD SF Overhede SO Total Number of its Number of new visits Direct meas) 10% Direct labor 10% ON 100 309 10 SO SS S450.000 15 Medical records Biling Other 30 SON 33 20 30 100% 100 100 100 2,040 2040 4. 30 100% $175.000 Basic data and calculation of unit costs using Conventional approach Baile Data Total Cost by Visit Type Calculation of Caut Unit by Type D E Initial Regular Intensive Total Coster Unit Given Glenliven A++ Initial Regular intensive Formula 1 Number of visits 2.000 5.000 1000 2 Direct materials etc.) 55,000 $15,000 $30,000 550.000 $2.50 $100 510.00 R2/ Row 1 3 Direct labor 590,000 $135.000 $225.000 $450.000 $45.00 $27.00 $75.00 Row 3/1) 4 Estimated overhead total is a given $175,000 $17.50 $175 $17.50 14/01 5 Cost per visit conventional method 565.00 147.50 $102.50 Sum Row - EXHIBIT 12.10 (CONTINUED) (1) Annual projections of overhead costs by activity and cost drivers (2) Unit cost calculations for these overhead the Cost and cont Driver Information Cost Given) Driver (Given) Units Giveni Unit Cont OIK) Activity 6 Intake 7 Medical records 8 Biling 9 Other 10 Total $26.250 $26,250 $52,500 $70,000 $175.000 New visits Hours spent Hours spent Visits 2,500 new visits 2.040 hours 4080 hours 10,000 visits $10.50 per new it $12.87 per hour $12.87 per hour $7.00 per visit Additional basic data (3) Basic data: actual annual operating results of cost drivers to be used in assigning ABC overhead cost Visit Type M Initial (Given) N Regular Given) O Intensive Given Total M+N+01 11 New visits 12 Medical records 13 Billing 14 Other 2,000 612 2,040 2.000 250 816 816 5,000 250 612 1,224 3,000 2.500 2.040 4080 10.000 Continued EXHIBIT 12.10 CONTINUED) Calculation of total and persoverhead costs using ABC 9 Initial $21.000 $7.875 U Formule 15 VUES 16 Medical records 17 Billing 18 Other 19 Total 20 Per visit Regular $2.625 $10.500 510.500 315.000 $58,625 $11.73 5 Intensive 52.625 57.875 $15.750 521.000 547.250 $15.75 Total 5M250 526250 $14.000 569. 125 $34.56 $175.000 $17.50 Row 19 Row 11 Unit cost estimates using ABC Visit Type V Initial $2.50 ABC 21 Direct materials 22 Direct labor 23 Overhead 24 Total using ABC $45.00 w Regular $3.00 $27.00 $11.73 $41.73 x Intensive $10.00 $75.00 $15.75 $100.75 Y Formula Row 2. col. FG Row 3. col. EFG Row 209 Sum Rows 21-21 $1456 $82.06 EXHIBIT 12.TO CONTINUEDI Comparison of unit costs ABC versus conventional Vill Type AC 25 Total conventional 26 Amount ABC estimate is more (less than conventional z Initial $65.00 $17.06 AA Regular $47.50 155.781 AB Intensive $102.50 151.751 AD Formula Row 5. col. ,,G) Row 24 - Row 250 Comparison of total costs: ABC versus conventional Visit Type Total AE Initial AF Regular AG Intensive AH (AE+AF + AG) All Formula Comparison of total costs and unit costs ABC vs. Conventional Activity-based costing method 27 Number of visits 28 Direct materials 29 Direct labor 30 Overhead 31 Total ABC 2,000 55,000 $90.000 5,000 $15,000 $135,000 $58.625 $208,625 3,000 $30,000 $225,000 $47.250 $302,250 10,000 $50.000 $450,000 $175.000 $675,000 Row 1) Row 23 Row 31 (Row 27 x Row 231 (Sum: Rows 28-30) $69,125 $164,125 Conventional method 32 Direct materials 33 Direct labor 34 Overhead 35 Total conventional 36 Amount ABC estimate is more (less) than conventional $5.000 590,000 $35,000 $130,000 $34,125 $15,000 $135,000 $87,500 $237,500 ($28,875) $30,000 $225,000 $52,500 $307,500 ($5,250] 550.000 $450,000 $175.000 $675,000 $0 (Row 23 (Row 31 (Row 27 x Row 5. EFG Sum: Rows 32-34) (Row 31 - Row 35) EXHIBIT 12.10 A COMPARISON OF A CONVENTIONAL AND AN ABC APPROACH TO COSTING THREE SERVICES GD GE GF GG Row Total Overhead Total Total Annual Hours Givens: overall percentages and totals GA GB GC Visit Type Initial Regular Intensive Number of visits 2096 5096 30% Number of new visits 80% 10% 10% Direct materials (etc.) 10% 3096 6096 Direct labor 2096 3096 5096 Intake or referral 7096 10% 20% Medical records 3096 4096 3096 Billing 5096 20% 30% Other 3396 3396 3396 Total overhead 100% 10046 100% 100% 100% 100% 100% 10096 10,000 2,500 $50,000 $450,000 15% 15% 30% 40% 100% 2.040 2,040 4,080 $175,000 Basic Data: Total Cost by Visit Type Calculation of Cost: Unit by Visit Type A B D E F G H Initial Regular Intensive Total Cost per Unit (Given) (Given) (Given) (A+B+C) Initial Regular Intensive Formula Basic data and calculation of unit costs using a conventional approach 2,000 5,000 3,000 $5,000 $15,000 $30,000 $90,000 $135,000 $225,000 1 Number of visits 2 Direct materials (etc.) 3 Direct labor 4 Estimated overhead (total is a given) 5 Cost per visit: conventional method 10,000 $50,000 $2.50 $3.00 $10.00 (Row 2 / Row 1) $450,000 $45.00 $27.00 $75.00 (Row 3 / Row 1) $175,000 $17.50 $17.50 $17.50 (D4/D1) $65.00 $47.50 $102.50 (Sum: Rows 2-4) Sum Rows 24 EXHIBIT 12.10 (CONTINUED) (1) Annual projections of overhead costs by activity and cost driver; (2) Unit cost calculations for these overhead activities Cost and Cost Driver Information 1 Activity Cost (Given) Driver (Given) K Units (Given) L Unit Cost (K) 6 Intake 7 Medical records 8 Billing 9 Other 10 Total $26,250 $26,250 $52,500 $70,000 $175,000 New visits Hours spent Hours spent Visits 2,500 new visits 2,040 hours 4,080 hours 10,000 visits $10.50 per new visit $12.87 per hour $12.87 per hour $7.00 per visit Additional basic data (3) Basic data: actual annual operating results of cost drivers to be used in assigning ABC overhead cost Visit Type M Initial (Given) N Regular (Given) o Intensive (Given) P Total (M+N+O) 11 New visits 12 Medical records 13 Billing 14 Other 2,000 612 2,040 2,000 250 816 816 5,000 250 612 1,224 3,000 2.500 2,040 4,080 10,000 (Continued) EXHIBIT 12.10 (CONTINUED) Calculation of total and per visit overhead costs using ABC Visit Type 15 New visits 16 Medical records 17 Billing 18 Other 19 Total 20 Per visit Q Initial $21,000 $7,875 $26,250 $14,000 $69,125 $34.56 Derivation of unit costs using an ABC approach R Regular $2,625 $10.500 $10,500 $35,000 $58,625 $11.73 5 Intensive $2,625 $7,875 $15,750 $21,000 $47,250 $15.75 Total $26,250 $26,250 $52.500 $70,000 $175,000 $17.50 Formula L6 x Row 11) 1 x Row 123 (B x Row 13) (L9 x Row 14) Sum Rows 15-18) (Row 19 I Row 1) Unit cost estimates using ABC Visit Type ABC V Initial 21 Direct materials 22 Direct labor 23 Overhead 24 Total using ABC $2.50 $45.00 $34.56 $82.06 w Regular $3.00 $27.00 $11.73 $41.73 Intensive $10.00 $75.00 $15.75 $100.75 Formula (Row 2 cols. E, F, G) (Row 3, cols. E, F, G) (Row 20) (Sum: Rows 21-23) EXHIBIT 72.10 (CONTINUED) Comparison of unit costs: ABC versus conventional Visit Type Z Initial AC 25 Total conventional 26 Amount ABC estimate is more (less) than conventional $65.00 $17.06 AA Regular $47.50 ($5.78) AB Intensive $102.50 ($1.75) AD Formula (Row 5, cols. E, F, G) (Row 24 - Row 25) Comparison of total costs: ABC versus conventional Visit Type Total AE Initial AF Regular AG Intensive (AE + AF + AG) Formula Comparison of total costs and unit costs: ABC vs. conventional Activity-based costing method 27 Number of visits 28 Direct materials 29 Direct labor 30 Overhead 31 Total ABC 2,000 $5,000 $90,000 $69,125 $164,125 5,000 $15,000 $135,000 $58,625 $208,625 3,000 $30,000 $225,000 $47,250 $302,250 10,000 $50,000 $450,000 $175,000 $675,000 (Row 1) (Row 2) (Row 3) (Row 27 x Row 23) (Sum: Rows 28-30) Conventional method 32 Direct materials 33 Direct labor 34 Overhead 35 Total conventional 36 Amount ABC estimate is more (less) than conventional $5,000 $90,000 $35,000 $130,000 $34,125 $15,000 $135,000 $87,500 $237,500 ($28,875) $30,000 $225,000 $52,500 $307,500 ($5,250) $50,000 $450,000 $175,000 $675,000 $0 (Row 2) (Row 3) (Row 27 x Row 5, E,F,G) (Sum: Rows 32-34) (Row 31 - Row 35)