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	$260		per day
Radiology	$210		per image
Pharmacy	$30		per physician order
Chemistry lab	$110		per test
Operating room	$940		per operating room hour

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

	Abel Putin		Cheryl Umit
Number of days	8	days	4	days
Number of images	6	images	5	images
Number of physician orders	6	orders	2	orders
Number of tests	7	tests	4	tests
Number of operating room hours	5	hours	3	hours

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

1. Determine the activity cost associated with each patient.

   Abel Putin	$
   Cheryl Umit	$

2. 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.