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Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as
Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. Recently a member of the hospitals accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to the hospital's estimated number of patient-days, its estimated overhead costs, and two of its patientsPatient A and Patient Bis provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day ICU 2,900 $ 5,057,600 $ 266 Other 5,800 $ 5,608,600 125 Total 8,700 $10,666,200 $ Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU Patient A $ 5,400 $ 27, 250 18 Patient B $ 7,100 $ 37,800 23 11 Required: 1. Assuming McCullough uses only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest whole dollar amount.) per patient-day 1a. Predetermined overhead rate 1b. Total cost for patient A Total cost for patient B 2a. Predetermined ICU overhead rate Predetermined Other overhead rate 2b. Total cost for patient A Total cost for patient B per patient-day per patient-day
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