1. 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	$168	per day
   Radiology	$237	per image
   Pharmacy	$59	per physician order
   Chemistry lab	$70	per test
   Operating room	$800	per operating room hour

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

   	Abel Putin		Cheryl Umit
   Number of days	6	days	11	days
   Number of images	2	images	7	images
   Number of physician orders	6	orders	8	orders
   Number of tests	2	tests	5	tests
   Number of operating room hours	2.5	hours	7	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 PutinCheryl Umit

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

   Abel PutinCheryl Umit

   is more than the activity cost of the other patient.

Activity Rates and Product Costs using Activity-Based Costing

Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows:

Activity	Budgeted Activity Cost		Activity Base
Casting	$235,440		Machine hours
Assembly	201,240		Direct labor hours
Inspecting	39,750		Number of inspections
Setup	44,370		Number of setups
Materials handling	47,700		Number of loads

Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow:

Activity Base	Entry		Dining		Total
Machine hours	5,200		4,610		9,810
Direct labor hours	4,470		6,710		11,180
Number of inspections	2,010		640		2,650
Number of setups	230		60		290
Number of loads	840		220		1,060
Units produced	10,400		5,200		15,600

a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.

Activity	Activity Rate
Casting	$fill in the blank 1	per machine hour
Assembly	$fill in the blank 2	per direct labor hour
Inspecting	$fill in the blank 3	per inspection
Setup	$fill in the blank 4	per setup
Materials handling	$fill in the blank 5	per load

b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round the per unit amounts to the nearest cent.

Product	Total Activity Cost	Activity Cost Per Unit
Entry Lighting Fixtures	$fill in the blank 6	$fill in the blank 7
Dining Room Lighting Fixtures	$fill in the blank 8	$fill in the blank 9