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	$252	per day
Radiology	$355	per image
Pharmacy	$56	per physician order
Chemistry lab	$100	per test
Operating room	$680	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	10	days
Number of images	4	images	8	images
Number of physician orders	7	orders	9	orders
Number of tests	2	tests	5	tests
Number of operating room hours	4	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.