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 1500. 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 Give overall percentages and totals GD OF Regulia SON Total 100 100% 10.000 Number of its Number of new visits Direct meas) 10 Direct labor 209 Intake on Medical records 30 SON Other 33 10% 30% 10% 60 SO S. 155 20 100% 100% 100 100 2,040 2,040 30 13% 3 304 100% $175.000 Basic data and calculation of unit costs using a conventional approach Base Date Total Cost by Visit Type Calculation of Caut: Unit by Type D E Initial Regular Intensive Total Cost per Unit Give Glenliven A++ Initial Regular intensive Formula 1 Number of its 2.000 5.000 1.000 2 Direct materials) 55.000 $15,000 $30,000 550.000 $2.50 $100 510.00 Row 2/ Row 13 3 Direct labor $90,000 $135.000 $225.000 $450.000 $45.00 527.00 $75.00 Row 3/Row 1) 4 Estimated overhead total is a given $175,000 $17.50 $175 $17.50 14DN 5 Cost per visit conventional method 565.00 547.50 $102.50 Sum Row - 10.000 EXHIBIT 12.10 (CONTINUED) (1) Annual projections of overhead costs by activity and cost drivers (2) Unit cost calculations for these overheads Cost and cont Driver Information Driver Cost Given) Units Giveni Unit Cost OIK) Given) 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 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 Total (M+N+ 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 CONTINUEDI Calculation of total and per visit overhead costs using ABC 9 Regular U 15 News 16 Medical records 17 Billing 18 Other 19 Total 20 Per visit 521.000 57.75 52.250 $14.000 569. 125 $34.56 Total 520250 526250 Derivation of unit costs using an ABC approach 5 Intensive 52.625 $7.875 $15.750 521.000 547.250 $15.75 $10.500 510500 315.000 $58,625 $11.73 $175.000 $17.50 19/1 Unit cost estimates using ABC Visit Type V Initial $2.50 ABC 21 Direct materials 22 Direct labor 23 Overhead 24 Total using ABC w Regular 53.00 $27.00 $11.73 541.73 x Intensive $10.00 $75.00 $15.75 $10025 Y Formula (Row 2. col. FG Row 3. col. EFG Row 20 Sum Rows 21-21 $1456 $82.06 EXHIBIT 12.TO CONTINUEDI Comparison of unit costs ABC versus conventional z AC Main Type AA Regular $47.50 155.781 25 Total conventional 26 Amount ABC estimate is more (less) than conventional $65.00 $17.06 AB Intensive $102.50 151.750 AD Formula Row 5. col. , , 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 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 (528,875) $30,000 $225,000 $52,500 $307,500 ($5,250) $50,000 $450,000 $175,000 $675,000 50 (Row 23 (Row 31 (Raw 27 x Row 5. EFG Sum: Rows 32-34) (Row 31 - Row 35)