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	$243	per day
Radiology	$343	per image
Pharmacy	$62	per physician order
Chemistry lab	$85	per test
Operating room	$740	per operating room hour

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

	Abel Putin		Cheryl Umit
Number of days	5	days	11	days
Number of images	3	images	8	images
Number of physician orders	3	orders	5	orders
Number of tests	3	tests	6	tests
Number of operating room hours	2.5	hours	6	hours

a. Determine the activity cost associated with each patient.

Abel Putin	$fill in the blank 1
Cheryl Umit	$fill in the blank 2

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

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