B and C

A D E F G B 1 St. Sophia's Hospital is preparing its budget for the coming year. It uses an activity-based approach for all costs 2 except physician care. Its emergency room has three activity areas with cost drivers as follows: 3 4 1. Reception-paperwork of incoming patients. Cost driver is the number of forms completed 5 2. Treatment-initial diagnosis and treatment of patients. Cost driver is the number of diagnoses treated 3. Cleaning-general cleaning plus preparing treatment facilities for next patient. Cost driver is the number of 6 people visiting emergency room (patients plus person(s) accompanying them). 7 Budgeted Amount of Cost Driver 8 Activity Area Cost Driver Rates Outpatients Admitted Patients 9 Reception $ 60 8,400 forms 6,500 forms 10 Treatment $ 120 8,000 diagnostics 5,400 diagnostics 11 Cleaning $ 21 7,400 people 3,400 people 12 13 a. Prepare the total budgeted cost for each activity 14 Activity: outpatients addmited patients 15 Reception $ 504,000 $ 390,000 16 Treatment $ 960,000 $ 648,000 17 Cleaning $ 155,400 $ 71,400 18 total $ 1,619,400 $ 1,109,400 b) How might you adjust the budget approach if you found that outpatients were kept in the emergency room for one 19 hour on average while admitted patients remained for two hours? 20 21 24 25 c. What advantage does an activity-based approach have over the hospital's former budgeting method of basing the next 26 year's budget on the last year's actual amount plus a percentage increase? 27 28 29 31 32