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	$178	per day
Radiology	$251	per image
Pharmacy	$43	per physician order
Chemistry lab	$101	per test
Operating room	$720	per operating room hour

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

	Abel Putin		Cheryl Umit
Number of days	2	days	9	days
Number of images	3	images	5	images
Number of physician orders	5	orders	7	orders
Number of tests	4	tests	7	tests
Number of operating room hours	2.5	hours	5.5	hours

a. Determine the activity cost associated with each patient.

Abel Putin	$
Cheryl Umit	$

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

apparently had a different condition that required more extensive treatment. Thus, the activity cost to is more than the activity cost of the other patient.