Activity-Based Costing for a Service Company

Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:

Activity		Activity Rate
Room and meals	$203	per day
Radiology	$286	per image
Pharmacy	$47	per physician order
Chemistry lab	$70	per test
Operating room	$900	per operating room hour

The activity usage information associated with the two patients is as follows:

	Abel Putin		Cheryl Umit
Number of days	4	days	11	days
Number of images	3	images	5	images
Number of physician orders	6	orders	8	orders
Number of tests	2	tests	5	tests
Number of operating room hours	4.5	hours	6.5	hours

a. Determine the activity cost associated with each patient.

Abel Putin	$fill in the blank
Cheryl Umit	$fill in the blank

b. Why is the total activity cost different for the two patients?

Abel PutinCheryl UmitCheryl Umit

apparently had a different condition that required more extensive treatment. Thus, the activity cost to

Abel PutinCheryl UmitCheryl Umit

is more than the activity cost of the other patient.