DBC$,$ TDABC, and ABC

The Bienestar Cardiology Clinic has two major activities: diagnostic and treatment. The two activities use four resources: nursing, medical technicians, cardiologists, and equipment. Detailed interviews have provided the following work distribution matrix shown below.

Resources

Activity Nursing Technicians Cardiologists Equipment Total Activity

Time

Diagnosing patients $0\mathrm{.}700\mathrm{.}800\mathrm{.}400\mathrm{.}6012,000$ hrs$.$

Treating patients $0\mathrm{.}300\mathrm{.}200\mathrm{.}600\mathrm{.}408,000$ hrs$.$

Total time $($hrs$.)4,0004,0006,0006,00020,000$

Cost $$80,000$ $$80,000$ $$320,000$ $$320,000$

The total time estimated corresponds to practical capacity $($interviewers adjusted the total time to about $80$ percent of the available time$).$ The equipment time is measured in machine hours. Thus, the total time $($at practical capacity$)$ in the system is $20,000$ hours. In considering the implementation of a TDABC model, the following unit times and transaction information are also provided:

Unit Time Driver Expected Activity

Driver Quantity

Diagnosing patients $3$ hrs No$.$ of patients $4,000$

Treating patients $0\mathrm{.}8$ hr$.$ No$.$ of treatments $10,000$

The clinic has identified three types of patients: those with no heart disease, those with mild heart disease, and those with severe heart disease. The following additional data are provided:

Patient Type Diagnosing Patients Treating Patients Average Time Spent Servicing

Each Patient Type $($Cycle Time$)$

No disease $2,00003$ hrs$.$

Mild disease $1,5005,0005\mathrm{.}6$ hrs$.$

Severe disease $5005,00011\mathrm{.}0$ hrs$.$

Activity cost $??$

Required:

$1.$ Calculate the activity costs for diagnosing and treating patients. Using the activity costs calculated, calculate the unit cost of servicing each type of patient using traditional ABC.

Activity rates

Diagnosing $fill in the blank $1$

$110$

Treating $fill in the blank $2$

$36$

Calculate the unit cost of servicing each type of patient using traditional ABC.

Unit Cost

No Disease $fill in the blank $3$

$220,000$

Mild $fill in the blank $4$

$345,000$

Severe $fill in the blank $5$

$2.$ Using TDABC$-$derived activity rates, calculate the unit cost of servicing each type of patient. If required round your answer to two decimal places.

Activity rates

Diagnosing $fill in the blank $6$

$110$

Treating $fill in the blank $7$

Unit Cost

No Disease $fill in the blank $8$

Mild $fill in the blank $9$

Severe $fill in the blank $10$

$33.$ Using DBC$,$ calculate the unit cost of servicing each type of patient. If required round your answer to two decimal places.

Unit Cost

No Disease $fill in the blank $11$

per patient

Mild $fill in the blank $12$

per patient

Severe $fill in the blank $13$

per patient

$4.$ Suppose that a medical consultant proposes a new patient$-$processing system that will shorten diagnostic and treatment times but would require more skilled nurses and technicians as well as an equipment upgrade. However, the total practical capacity would remain the same, at $20,000$ hours. Total resource costs are predicted to increase by $$100,000.$ The consultant estimates that the cycle times for each patient type would be reduced from $3$ to $2$ hours, $5\mathrm{.}6$ to $4\mathrm{.}5$ hours, and $11$ to $9$ hours. The physicians that own the clinic have expressed a willingness to implement the changes, provided that the unit cost of servicing each patient type decreases. Use DBC to estimate the new unit costs. If required round your answer to two decimal places.

Unit Cost

No Disease $fill in the blank $14$

per patient

Mild $fill in the blank $15$

per patient

Severe $fill in the blank $16$

per patient

Should the clinic implement the new system?

Discuss the advantages of DBC for this analysis over ABC and TDABC. Finally, identify the data analytic types $($descriptive$,$ diagnostic, predictive, or prescriptive$)$ that apply for this analysis $($see Exhibits $2\mathrm{.}5$ and Exhibits $2\mathrm{.}6,$ for a review of data analytic types$).$ Note: More than one analytic type might apply.

The data analytic types are

$.$ The unit costs are what are likely to happen given the estimates. The

in unit costs and the

in ability to process more patients suggest that the clinic

adopt the new system.