Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 hospital's 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 patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day Direct materials Direct labour Total number of patient days (including ICU) Number of patient days spent in ICU Patient A $ 2,830 $31,880 20 0 ICU 1,910 $ 2,436,000 $ Other 28,190 $ 9,963,990 480 $ 50 Patient B $ 8,120 $16,480 20 10 Required: 1. 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 labour, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough continues to use only one predetermined overhead rate, calculate a. The predetermined overhead rate. b. The total cost, including direct materials, direct labour, and applied overhead, assigned to Patient A and Patient B. (Round your intermediate calculations and final answers to 2 decimal places.) 1a. Predetermined ICU overhead rate Predetermined Other overhead rate 1b. Total cost for patient A Total cost for patient B 2a. Predetermined overhead rate 2b. Total cost for patient A Total cost for patient B per patient-day per patient-day per patient-day
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started